Ypsomed Holding AG Annual Report 2012/13

Transcription

1 Ypsomed Holding AG Annual Report 2012/13

2 Ypsomed Holding AG Annual Report 2012/13

3 Ypsomed Better Life Giving patients the opportunity to treat and control their illnesses themselves in order to lead independent lives: thanks to self-medication, this has become a reality for millions of people, such as diabetics, all over the world. For ten years, Ypsomed has been working to make a more autonomous and simpler life accessible to additional groups of patients. This continues to be possible thanks only to staff who are enthusiastic, skilled, eager to learn and who think for the long term. People like this all of whom have been with Ypsomed since the start are introduced on the pages that follow.

4 Ypsomed Better Life Every day, diabetics use a pen and needle to inject themselves with insulin several times a day. In order to ensure that this injection is as painless and as safe as possible, Matthias Stalder, Strategic Purchaser for the production of the mylife Clickfine and Penfine needles, is in close contact to a global network of suppliers. Maintaining close partnerships with Ypsomed s cannula suppliers high-tech companies in their own right and satisfying the complex requirements associated with patient safety are top priorities for Matthias Stalder.

5 Matthias Stalder Senior Buyer Strategic Purchasing

6 During his ten years at Ypsomed, Shift Supervisor Esref Asani has already seen many millions of pen needles leave the clean room. Unlike his desk-bound colleagues, Esref Asani cannot simply arrive at work and get started before beginning his shift, he has to follow a complex procedure that involves special clothing and cleaning procedures, because when it comes to needle production, only the very highest standards of cleanliness and quality will do. Esref Asani, a highly energetic individual who coaches soccer in his spare time, gives his all day in, day out, to ensure that these standards are met.

7 Esref Asani Shiftleader Production

8 Ypsomed Better Life A vast array of purchased parts, raw materials, auxiliary materials and consumables are required from suppliers in order to manufacture an injection pen. Added to this are complex assembly processes partly automatic and partly manual together with the most stringent of requirements in terms of quality and traceability, and changing customer needs: the planning and coordination of pen production at Ypsomed is a herculean task. Process Specialist and Planner Yves Bürgin rises to the challenges posed by this task every day with a great deal of vigor, optimism and humor.

9 Yves Bürgin Planner Expert Supply Chain Management

10 Elsbeth Hofer works in printed circuit board production and manufactures E-modules. These are used, for example, in the Genotropin Pen that Ypsomed manufactures for Pfizer. The Genotropin Pen is used for daily injections of human growth hormone. During her shift, Elsbeth Hofer is aware of the continuous virtual presence of the patients. She recognises that the precision and care that she applies to her work directly benefits many people.

11 Elsbeth Hofer Employee Assembly, Printing & Packaging

12 Ypsomed Better Life Making sure that a machine measuring 36 meters in length never comes to a standstill if at all possible this is the challenge facing Fikret Vukovic and his team in the Solostar component production department. To achieve this, Fritz, as he is known a keen and multi-talented craftsman in his spare time sometimes has to act very quickly, with the same speed and enthusiasm that he also demonstrates when tackling new challenges in his workshop at home. And this speed and enthusiasm pays off: over the course of the last business year, Ypsomed supplied Sanofi with many millions of components for the Solostar insulin pen.

13 Fikret Vukovic Employee Assembly, Printing & Packaging

14 Before joining Ypsomed ten years ago, Petra Scherrer sold precious goods in a jeweler s shop. Today, she and her team perform checks several times a day to ensure that the insulin pen components produced satisfy the stringent standards relating to quality and patient safety. It s no coincidence that Petra Scherrer s department is called In Process Control (IPC): thanks to the work performed in this department, deviations are identified as they happen and remedies implemented immediately.

15 Petra Scherrer Manager In-Process-Control

16 Ypsomed Better Life When Design Engineer and skilled toolmaker Patrick Hostettler sits down with paper and pencil, this is generally a sign that self-medication will soon be an even easier process for patients. Thanks to various aids such as CAD and 3D printers, sketches are developed into prototypes which result in improvements and innovations for Ypsomed products. For Patrick Hostettler, the highlight of his work is when a product featuring his newly developed functions enters into production and is used by patients on a daily basis.

17 Patrick Hostettler Design Engineer

18 The fact that prototypes ultimately become mass-produced products is due in no small part to Markus Schütz and his team of toolmakers. With Markus Schütz at the helm, metal molds called cavities are produced with maximum precision. The automatic injection molding machines used in the production process can be fitted with these tools to produce plastic parts e.g. for pens, pen needles or the new insulin pump in quantities ranging from a few thousand to many hundreds of millions.

19 Markus Schütz Manager Tool Manufacturing

20 Ypsomed Better Life Sybille Brand, a Receptionist at Ypsomed, is faced with a huge variety of requests. She could be dealing with customers and suppliers in urgent need of information. Or nervous potential employees before their first interview. Or patients ordering the new mylife OmniPod patch pump. Sybille Brand, who after ten years at Ypsomed also feels very much at home in the company, is happy to be the first point of contact and to offer a helping hand to all of these different people.

21 Sybille Brand Receptionist

22 When Vincenzo Collura s phone rings, he knows that the person at the other end of the line is likely to have a problem: he works in IT Support at Ypsomed. For Vincenzo Collura, a keen salsa dancer in his spare time, helping his baffled or desperate colleagues to overcome their IT problems is a challenge that he relishes. His work can involve anything from setting up a PC to completing full projects. Vincenzo Collura enjoys his work at both ends of the spectrum.

23 Vincenzo Collura System Specialist, Information & Communication Technology

24 Ypsomed Better Life As Quality Manager in the Test Planning department, the challenge facing Francisco Prieto is to help his colleagues to conquer their fear of statistics. Statistical Process Control (SPC) is one of the most important quality control methods at Ypsomed and involves measuring important production data every few hours in order to detect potential problems before they have even occurred. Francisco Prieto designs and monitors the implementation of the high-tech equipment and processes required for this.

25 Francisco Prieto Sub-Project Leader Test Planning

26 Is the supplied order correct in terms of quantity, design and quality? Zeljko Andricic, Quality Inspector in the incoming goods inspection department, asks himself this question many times a day. It is crucial that the answer to this question is yes : if the input into a production process is incorrect, all subsequent operations in the company waste time and effort. It is therefore essential that each and every inspection is fully documented and traceable. For Zeljko Andricic, constantly thinking about the patient is second nature.

27 Zeljko Andricic Employee Incoming Goods Inspection

28 Ypsomed Annual Report Contents 17 Letter to the shareholders Annual Report 17 Ypsomed key figures at a glance 20 Annual Report YDS Ypsomed Delivery Systems 20 More success with YDS Ypsomed Delivery Systems 22 Ypsomed Custom Products à la carte injection systems mylife Diabetescare 25 mylife Diabetescare comprehensive diabetes care 27 mylife Unio blood glucose meter enjoy innovation 28 Ypsomed pen needles a 20-year-old success story 30 mylife OmniPod the only tubing-free insulin pump on the market 32 The new insulin pump from Ypsomed small and smart 33 mylife Orbit infusion set freely rotates Sustainability Report 35 Sustainability and social responsibility 41 Environment 43 Financial Report 43 Comments on the consolidated financial statement 2012/13 45 Consolidated financial statement 2012/13 67 Financial statement of Ypsomed Holding AG 2012/13 74 Five-year overview 75 Corporate Governance Report 75 Corporate Governance 95 Information policy 96 Glossary

29 Ypsomed Annual Report Letter to the shareholders Annual Report Dear shareholders In the 2012/13 business year, the Ypsomed Group posted consolidated sales of CHF million and operating profits of CHF 4.8 million. Although sales were down slightly on the previous year, falling by 1.6%, cost savings enabled us to maintain profitability at the previous year s level, with an EBIT margin of 2.0%. In the 2012/13 business year, Ypsomed increased sales of goods and services in the Diabetes Direct business by 16.9% to CHF 91.4 million, aided significantly by the mylife OmniPod insulin patch pump virtually doubling its sales. In the Delivery Device business, Ypsomed achieved sales of goods and services of CHF million in the 2012/13 business year, 10.2% below the previous year s figures. Also included in the previous year s figures were the last sales from the deliveries of OptiSet and OptiPen to Sanofi. The current year saw the start of deliveries for new pen customers, although these could not compensate for the Sanofi sales, and delays in drug approvals for major customers had a negative impact. This resulted in a delay to the start of production of the pen systems in question, and their delivery, by up to twelve months. The operating profit in the Delivery Device business, amounting to CHF 9.5 million, was thus 31.5% below the previous year s level. Although the operating profit in the Diabetes Direct business improved by 68.1%, it remained negative at CHF 2.9 million, on account of the costs of the ongoing market launch of new Diabetescare products. The mylife Unio blood glucose meter was not launched until the fourth quarter of this business year. This considerable delay meant that, while costs were incurred for the launch and sample supply, the planned sales will be realized with a certain time lag. Key figures at a glance in thousand CHF April 1, 2012 March 31, 2013 April 1, 2011 March 31, 2012 Change in % Sales of goods and services % thereof Delivery Devices % thereof Diabetes Direct business % thereof others % Gross profit % Gross profit in % 23.3% 22.7% Operating profit % Operating profit in % 2.0% 2.1% Net profit % Net profit in % 0.7% 3.4% Earnings per share (in CHF) % Research and development expenditures, total % Investments in fixed assets % Equity ratio in % 63.6% 66.6% Employee headcount (as of March 31) % Employees fulltime equivalents (as of March 31) % Audited Swiss GAAP FER figures. In thousand CHF. Earnings per share in CHF. 17

30 Ypsomed Annual Report Pleasing progress and successes in the 2012/13 business year But let us now turn to the many positive events of the 2012/13 business year. In the Delivery Device business, we have clearly positioned our products and services for pharmaceutical customers under the new Ypsomed Delivery Systems (YDS) umbrella brand. Expiring patents and the development of new proprietary and biosimilar drugs are stimulating the demand for suitable injection systems. On account of its development expertise and broad portfolio of off-the-shelf pen systems and autoinjectors, Ypsomed is continually receiving enquiries from large pharmaceutical companies and from regional pharmaceutical companies in fast-growing newly industrialized countries. While several pharmaceutical customers are currently testing autoinjectors and pen systems from Ypsomed within the framework of clinical trials, in the 2012/13 business year two new customers launched the ServoPen on the market, and the third largest pharmaceutical company in India, Lupin Limited, is planning a market launch from May 2013 onwards. While it makes sense to locate the highly automated manufacture of products such as pen needles or disposable pens in Switzerland, the making of products that require a high level of manual work is increasingly being outsourced to other countries. Asian markets in particular are extremely attractive for biosimilar drugs, and their manufacturers are consequently interested in affordable pen systems such as the YpsoPen Twist. Ypsomed is therefore industrializing the YpsoPen Twist in Switzerland, and in the course of the following business year will outsource production to China. There is similar concrete demand for the UnoPen, a disposable insulin pen, for which we began building up production capacities in Switzerland in the last business year. Also worth mentioning is the high order volume for components for the SoloStar pen from Sanofi, which Ypsomed achieves in contract manufacturing. We are particularly pleased with the positive development of the Diabetes Direct business segment in the 2012/13 business year. Sales of mylife Diabetescare products increased by 16.9% overall from CHF 78.2 million to CHF 91.4 million. Particularly promising was the noticeable growth in sales generated by the tubing-free mylife OmniPod insulin patch pump. In the last year, Ypsomed has introduced the second generation of these much smaller and lighter pods to the market, and is delighting even more pump users. We have also succeeded in extending the distribution rights for the mylife OmniPod to now cover 25 countries in Europe, the Middle East and Asia, and in prolonging their terms to 2016 or, under certain conditions, to Also in the 2012/13 business year, we were able to sign important distribution contracts, including for the mylife Orbit infusion set, with distribution partners in Canada and Saudi Arabia. The production of pen needles, which celebrated its 20th anniversary this year, has been significantly expanded, and from 2013 onwards it will be concentrated at the Solothurn site. Ypsomed celebrates its tenth anniversary Against the background of this successful development, we are delighted that this spring we celebrated our tenth anniversary. As you will be aware, Ypsomed emerged from Disetronic, when on April 30, 2003, Roche Holding AG acquired the infusion business within the framework of a public takeover bid, while we continued the injection business under the new company name of Ypsomed. With the vision expressed by the phrase Ypsomed solutions make self-care simpler and easier, since then we have pursued our strategy with enterprise and consistency. Ypsomed offers patients solutions for self-injection of medications, particularly products for people with diabetes who are insulin-dependent. In the first phase we were extremely successful with the insulin pen systems that we had developed ourselves. From 2003 to 2006, sales rose from CHF million to CHF million, and in the 2005/06 business year we achieved around 64% of our sales with Sanofi-Aventis alone. Looking back however, this success put us in a position of great dependency, and thus in recent years also created numerous problems which took longer to solve than we had anticipated at the time. Ypsomed We are proud that since Ypsomed became independent in 2003, an international medical technology enterprise has come into being, which today is active in over 50 countries and employs around 1000 people. 18

31 Ypsomed Annual Report has however grown by meeting these challenges, and thanks to its high equity ratio it has always been able to act autonomously and invest enterprisingly. We have successfully diversified our customer base for the injection systems and extended the mylife Diabetescare business, so that today there is no longer any such dependency. Achieving all this has demanded an enormous amount of commitment from our employees over the last ten years, and we would like to take this opportunity to express our thanks to them for this. Outlook For the forthcoming business year, we anticipate growth in sales of about 10.0%. EBIT is expected to be approximately double the previous year s level. In terms of sales and EBIT, performance in the first half of 2013/14 will remain moderate and on a par with the previous year, as this period will be hit by costs from industrialization and optimization projects. In the second semester, planned new product deliveries and the effects of the optimization projects will lead to significant increases in sales and earnings. Annual Report Back to the roots of our success, with infusion systems In the context of strategic orientation, we have very deliberately extended our product portfolio for mylife Diabetescare by adding infusion systems and appropriate accessories. Thus through acquisition, Ypsomed has taken over the mylife Orbit infusion set, and in important markets in Europe we have achieved a significant market share in a short space of time with the world s first insulin patch pump, the mylife OmniPod. A decisive role was also no doubt played here by our own sales force, specializing in diabetes, in our subsidiaries in Germany, France, Great Britain, Switzerland, the Netherlands, Austria and the Nordic countries. We plan to further strengthen the infusion business in the future and are delighted with the concrete advances in the development of our own insulin pump in the last business year. The market for insulin pumps holds great potential, which we intend to utilize. We are also following a different path from our competitors: our new insulin pump will be simplified in both functional and technical terms, and it will be used with a pre-filled standard insulin ampule, which makes using the pump much easier and more convenient. It will also be a decisive factor that here at Ypsomed, with our own mylife Orbit infusion set, we have a great deal of flexibility and latitude in marketing, since we can influence the costs of this important component ourselves. We are confident that with our new insulin pump, we shall facilitate access to the best insulin treatment available today for many more people with diabetes. With this clear reinforcement of the infusion business, with Ypsomed we are returning to our roots, and we are confident that with innovative infusion systems, we can once again build on the successes of Disetronic. We wish to thank you, our valued shareholders, for your confidence in us. Dr. h. c. Willy Michel Simon Michel Chief Executive Officer, CEO Senior Vice President Marketing & Sales and Chairman of the Board of Directors </177 19

32 Ypsomed Annual Report More success with YDS Ypsomed Delivery Systems A wide range of injection systems and comprehensive services Ypsomed is well-known to pharmaceutical and biotech customers worldwide, who put their trust in Ypsomed s recognized expertise and decades of experience in developing and manufacturing innovative injection systems. For a year now, the wide range of injection systems and the comprehensive services offered by Ypsomed have also had their own brand name: Ypsomed Delivery Systems (YDS). The YDS umbrella brand encompasses a comprehensive range of innovative injection systems as well as flexible services covering all aspects of the development and manufacture of injection systems. These are specifically: Custom Products Contract Development and Manufacturing Contract Manufacturing Drug & Device Assembly A rise in self-medication using injection systems The sharp increase in drugs manufactured using biotechnology, such as peptide hormones and monoclonal antibodies, the majority of which can be administered subcutaneously, is inevitably resulting in a rise in self-medication using injection systems. Low-cost, ergonomic and safe pen systems or autoinjectors for pre-filled syringes, such as those offered by Ypsomed in its product portfolio, are used in the treatment of diabetes, growth disorders, infertility, osteoporosis, hepatitis C, multiple sclerosis, cancer and autoimmune diseases such as rheumatoid arthritis, psoriasis and Crohn s disease. Ypsomed Delivery Systems offers a complete range of technologies and services for reliable and user-friendly self-medication injection systems. Custom products and services As a full-service partner, Ypsomed offers customized injection systems based on its well-developed and industrialized platforms. However, Ypsomed can also provide custom services to meet customers individual requirements, such as the new development of injection systems on the customer s behalf or the contract manufacturing and assembly of medical technology components. If required, the manufactured pen systems can also be supplied ready-filled with the drug. With YDS Ypsomed Delivery Systems Ypsomed is making a key contribution to the safety and success on the market of pharmaceutical and biotech companies products, thanks to its full range of services from technical development and design to manufacture and drug and device assembly. Greater trust greater success thanks to Ypsomed Delivery Systems. An increased demand for injection systems due to a growing pharmaceutical market The development of the global pharmaceutical market is of major importance to Ypsomed s Delivery System business. As already pointed out in the 2012 semi-annual report, the global pharmaceutical market is experiencing very positive growth of 5 7% and, according to estimates by IMS Health, this is expected to increase to US$ 1150 billion by Over the same period, sales of injectable drugs will increase from the current figure of US$ 170 billion to over US$ 200 billion. While the growth rate for the established markets, such as North America, Europe, Japan and Australia, is between just 1and 3%, growth in Asia and Latin America is much stronger at 12 13%. A sustained high level of growth can particularly be observed in China, India, Russia, Brazil, South Korea, Mexico and Turkey. The reasons behind the growing demand within the pharmaceutical market demand which will continue to rise in the future are an ageing population and, in particular, the sharp rise in prosperity in newly industrialized countries with the associated improvements in healthcare provision. With YDS Ypsomed Delivery Systems, Ypsomed is geared towards the global market and is therefore very confident that it will be 20

33 Ypsomed Annual Report Estimated loss of branded drug sales 50 ($ billion) Annual Report Quelle IMS Health able to take advantage of this growth potential. More than 1.3 billion 3 ml insulin cartridges are already manufactured each year, which is leading to a high level of demand for pen systems. The market for pre-filled syringes (1 ml) for drugs manufactured using biotechnology is also growing, with a current annual market volume of around 300 million units. Only around 8% of these are offered in conjunction with an autoinjector at present. With its diverse product range, Ypsomed is well positioned in the fastgrowing autoinjector market their market launch, especially in the USA, the biggest pharmaceutical market in the world. To date, Europe has led the field in this area, with sales of biosimilar products in 2011 of around US$ 400 million according to Datamonitor, an independent market research institute. The rate of growth increased in 2012 following the introduction of mandatory guidelines and approval criteria, and sales of biosimilar products are therefore expected to increase significantly in the years to come. IMS Health estimates that global sales of biosimilars will be worth US$ 2.6 billion in 2015, while PharmaIntellect is forecasting sales of US$ 14 billion in The pharmaceutical group Pfizer estimates sales of biosimilar drugs of some US$ 40 billion in The patent cliff and the development of biosimilar drugs Despite these positive growth prospects, the pharmaceutical market is currently in a state of upheaval, due to the expiration of important patents for drugs with strong sales. The graph shown above is based on information provided by IMS Health and clearly illustrates the patent cliff, as this phenomenon is known marked a high point, because it was in this year that drugs representing the greatest value lost their patent protection. There is a close correlation between the patent cliff and the development of biosimilar drugs. Biosimilar drugs are protein-based mimetic drugs that have been produced using biotechnology and which are approved after the expiration of the patent period of the original preparation. All over the world, the development of a large number of biosimilar active ingredients, such as for long-acting insulins, has been taking place for some years. A degree of uncertainty surrounding the regulatory framework conditions relating to the approval of new biosimilar drugs has so far delayed Biosimilar drugs an opportunity for Ypsomed This upheaval in the pharmaceutical market will open up new opportunities and Ypsomed wants to take advantage of these. As a result of the loss of patent protection for existing drugs, new suppliers of biosimilar drugs are emerging, who have little or no injection system expertise of their own. With its comprehensive YDS range, Ypsomed is attractive to regional pharmaceutical companies in Asian countries in general, and in China and India in particular, as well as to companies in the Middle East and in newly industrialized countries in Eastern Europe. However, these new suppliers are not alone in looking for an expert and flexible partner, such as Ypsomed, who can offer a wide range of injection systems for the safe and user-friendly administration of their insulin products and other liquid drugs. Large and established pharmaceutical companies also have plans to introduce biosimilar products onto the market and, in order to do this, will need economical, standardized injection systems. 21

34 Ypsomed Annual Report Ypsomed Custom Products à la carte injection systems Suitable injection systems for both global and local pharmaceutical companies Pharmaceutical customers have varying needs in terms of both the functionality of the injection systems and the costs, depending on the specific drug and its use, as well as the prevalent market conditions in the country concerned. Thanks to its three established product groups with reusable and disposable pens, autoinjectors and dual chamber pen systems, Ypsomed can always supply both global pharmaceutical groups and pharmaceutical companies operating at a regional level with the injection systems to suit. With its triedand-tested platform technologies, Ypsomed can guarantee rapid availability from clinical studies to market launch. Pharmaceutical customers can successfully set themselves apart from their competitors on the market, thanks to Ypsomed s innovative, patented and user-friendly injection systems. ServoPen reusable pen market potential here, since, according to the World Health Organization (WHO), there are currently around 51 million diabetics living in India, with this figure expected to rise to around 85 million by the year The ServoPen, which is manufactured in Switzerland, is an attractive product, thanks to its sophisticated functionality and high quality. Patients also appreciate the unique user comfort and convenience of the ServoPen which has been awarded a number of design prizes. It features many technical benefits, such as a bayonet connection for replacing the cartridge with ease, a simple dose setting function with an option to adjust the dose, spring-driven injection and a dose interruption function. Thanks to the aluminum casing, the ServoPen is both lightweight and extremely robust. It is available in various colors depending on the customer s preference. ServoPen for an Indian pharmaceutical company In the 2012/13 business year, the ServoPen was freshly brought to market by two customers: both Square Pharmaceuticals Ltd. and Incepta Pharmaceuticals Ltd. are successfully distributing the Ypsomed ServoPen. Tonghua Dongbao Pharmaceutical (China) and Pharmstandard (Russia) are existing customers of the ServoPen insulin pen. Ypsomed is particularly proud of the fact that the high-quality ServoPen insulin pen has played a significant role in the successful growth of Tonghua Dongbao in China. Lupin Ltd., another customer from the Indian subcontinent, is planning to introduce the ServoPen onto the market in May Lupin Limited is the third-largest pharmaceutical company in India and one of the world s leading manufacturers of generic drugs. Lupin distributes the Lupisulin Pen with Lupisulin, its human insulin which is an established product on the Indian market. Ypsomed has had a presence in India with its own subsidiary since the 2009/10 business year and believes that there is great The economically priced YpsoPen Twist insulin pen The insulin market is growing worldwide at a rate of around 10% per year, while the growth rate in newly industrialized countries is significantly higher still. Diabetics are increasingly turning away from conventional syringes and insulin vials in favor of pen systems. In price-sensitive markets, there is a particular demand for reusable insulin pens, because disposable pens currently make insulin treatment too expensive. In recent years, local insulin suppliers in particular have been investing substantially in their production capacities and aim to supply diabetics in their region with low-cost insulin and reasonably priced reusable insulin pens. Ypsomed has therefore developed the affordable YpsoPen Twist insulin pen. This pen satisfies all the requirements for a modern insulin pen, but with the key benefit of being reasonably priced and suitable as a value pen for newly industrialized countries. The dose is variable and can be adjusted easily. The YpsoPen Twist has a large display, which means that the dose is easy 22

35 Ypsomed Annual Report Annual Report YpsoPen Twist reusable, «value» pen UnoPen disposable pen to read for enhanced safety. Unlike the ServoPen, the injection is performed manually, but virtually no force is required. With the YpsoPen Twist, changing the insulin cartridge and resetting the threaded rod is also both simple and convenient. The YpsoPen Twist is particularly well-suited to the Chinese market, which is recording huge growth, as well as to India and countries with tender procedures. YpsoPen Twist Industrialization in Switzerland Ypsomed is industrializing the YpsoPen Twist in Switzerland and is optimizing it for semi-automatic mass production. Depending on the local pharmaceutical customers needs, the YpsoPen Twist is then manufactured in China by a contract manufacturer. This ensures that Ypsomed s innovative YpsoPen Twist can be used even in price-sensitive markets and rural regions with relatively low purchasing power. The YpsoPen Twist is also suitable for administering drugs other than insulin and therefore offers interesting market potential. The UnoPen the intuitive and user-friendly disposable pen In addition to reusable pens, Ypsomed also offers disposable pens for both insulin and other liquid drugs. The UnoPen developed by Ypsomed, for example, is well-suited to insulin suppliers who are competing with the major suppliers in established markets, but it is also suitable for administering GLP-1 drugs, as well as parathyroid (PTH), growth (hgh) and fertility hormones (FSH). The user-friendly and yet economically priced disposable pen is very well accepted by users and is an important marketing tool that allows pharmaceutical customers to clearly set themselves apart from their competitors. The UnoPen therefore plays a major role in pharmaceutical customers success on the market. Investment will be made in production facilities during the next business year. Ypsomed is taking advantage of synergies with a number of UnoPen customers and is therefore able to offer attractive prices, even for smaller quantities. Ypsomed is investing in production facilities for the userfriendly, economically priced UnoPen. 23

36 Ypsomed Annual Report YpsoMate leading autoinjector technology from Burgdorf The market for drugs in pre-filled syringes is growing constantly and is becoming ever more important. Examples include drugs for autoimmune diseases or long-acting drugs that are administered with a fixed dose. Patients are increasingly looking for user-friendly autoinjectors which are safe and easy to handle, such as the YpsoMate by Ypsomed, in order to inject these drugs. The YpsoMate autoinjector is currently undergoing tests as part of several clinical studies that are being conducted in the USA, Europe and Japan, and the results are both positive and convincing. The YpsoMate and YpsoMate Control are both disposable, single-use autoinjectors for pre-filled 1 ml syringes made of glass or plastic. The YpsoMate autoinjectors are compact and ergonomic to handle. The needle is invisible to the patient, before, during and after use, making it more acceptable to patients and therefore resulting in more successful treatment. The clearly audible clicks during use and a large viewing window through which the syringe body can be seen increase patient confidence and safety, and provide confirmation that the full dose has been injected. The YpsoMate enables the drug to be injected comfortably and automatically as soon as the autoinjector is pressed against the skin. With the Ypso- Mate Control, after needle insertion, the patient then uses a push button to control the start of the injection. YpsoMate and YpsoMate Control autoinjectors Thanks to their simplicity of use, safety and compact design, the YpsoMate and YpsoMate Control by Ypsomed are setting new standards within the industry for modern autoinjector technology. Future developments in injection systems Across the board, there is a trend towards lower-cost pen systems. It is therefore all the more important for Ypsomed to be able to offer a wide range of injection systems that meet the expectations of pharmaceutical and biotech customers in terms of both functionality and price. Pen systems with a spring mechanism in particular are being increasingly used since these allow for safe, controlled application with minimum force. In future, interactive communication between injection systems and other devices or systems may well become increasingly significant. What are being sought are intelligent solutions for labeling and systems that allow for the drug dose administered by the patient to be checked and, if necessary, recorded in a readily understandable way. This trend is already well-advanced in the insulin pump and blood glucose meter sectors. 24

37 Ypsomed Annual Report mylife Diabetescare comprehensive diabetes care A dynamic diabetes market increasing demand, in spite of pressure to cut healthcare costs Diabetes care is one of Ypsomed s two strategic business segments. Given the increasing demand worldwide, diabetes care is an attractive, but also highly dynamic market, since the pressure to cut costs in the healthcare sector has risen sharply in recent years. In this tense environment, Ypsomed is bearing up well with its range of innovative and highquality products for the treatment of diabetes which are marketed under the mylife Diabetescare umbrella brand. The mylife Diabetescare umbrella brand covers all of the diabetes products manufactured or distributed by Ypsomed, such as the mylife Optifine and mylife Clickfine pen needles, the mylife Clickfine AutoProtect safety pen needle, the mylife OmniPod insulin patch pump, the mylife Orbit infusion sets, the mylife DailyDose insulin syringes and the mylife Pura and mylife Unio blood glucose meters. The mylife services include the mylife newsletter, mylife Diabetescare Chat on Facebook and mylife Direct, the online diabetes shop. More information about mylife Diabetescare and its range of user-friendly products and services can be found at Development and challenges in the diabetes market The dynamic development and many challenges in the diabetes market are diverse and are of key importance in terms of the Ypsomed strategy for diabetes care. The diagram below provides an overview of the market development. Below you will find a summary of the main market trends and Ypsomed s business response to these challenges in terms of its Diabetescare strategy. Increasing demand for diabetes care There is a growing number of people with diabetes who must be treated and this is creating a high level of demand for diabetes care products. Product innovations, such as new diabetes drugs or user-friendly diabetes management systems, are leading to the sustained improvement and increased focus on diabetes treatment concepts. The result is an expansion of the products on offer, or a greater variety of available products and, combined with the increasing number of diabetics, a sharp rise in the demand for diabetes care products. Annual Report Development of and factors influencing the diabetes market Price reduction Competitors New products/competitors Negative drivers Cost controls Reduction in healthcare costs Tender procedures Increased demand for diabetes treatment Emerging markets with growing budgets New therapy possibilities Innovative technologies Positive drivers million diabetics (IDF estimate) Increasing numbers of diabetics Population growth Longer life expectancy Lifestyle Nutritional changes Today 370 million diabetics (IDF estimate) 25

38 Ypsomed Annual Report Pressure to cut healthcare costs and falling prices for diabetes products Increasing demand is resulting in skyrocketing costs in healthcare in general and in diabetes treatment in particular. The World Health Organization (WHO) estimates that the costs of diabetes care are currently in the region of 450 billion Swiss francs and that this figure will rise to 560 billion Swiss francs by In view of these high costs and limited budgets, it is not only authorities, politicians and funding agencies such as health insurance providers and insurance companies who want lower costs and cheaper products, but also patients themselves. These are increasingly being offered by Asian low-cost suppliers. The global rise in demand for diabetes care is coinciding with a general trend towards reduced costs and the impact of this varies according to product category. Pen needles: In terms of the quantity of sales, the market is growing by a high single-digit percentage figure in conjunction with the growing demand for insulin and other liquid drugs such as GLP-1. However, advanced price erosion affecting pen needles is evident internationally and market growth in Swiss francs is therefore stagnating. Ypsomed offers a wide variety of pen needles, ranging from low-cost pen needles for countries with tender procedures to private label products, user-friendly click pen needles and disposable, single-use safety needles. Blood glucose meters: The market for test strips for the selfmonitoring of blood glucose levels is currently in an accelerated price reduction phase. In the USA and in Europe in particular, there are increasing numbers of competitive tenders, and health insurance providers, insurance companies and manufacturers are attempting to circumvent traditional sales channels, impose price reductions or bundle customer supplies by means of specific products. Ypsomed offers a full range of suitable products in this highly competitive market. Insulin pump treatment: The insulin pump market is recording double-digit growth of just over 15%, although the growth rate in the USA is below average. The potential for insulin pump treatment is particularly high in Europe and Asia. The price level for both insulin pumps and insulin itself is still relatively high, but this may well come under pressure during the next few years. In the case of insulin, important patents are due to expire and new suppliers of biosimilar drugs will enter onto the market. The rise in competition between insulins is increasing the significance of userfriendly pumps and pen systems, and this will lead to higher demand for these products. With the mylife Omni- Pod, Ypsomed offers the European market the world s first insulin patch pump. Thanks to its in-house development of its own insulin pump, Ypsomed will also help make reasonably priced insulin pump treatment more widespread in the future. High-quality products thanks to many years of experience Regardless of the increasing pressure to cut costs, demand for diabetes care products will rise further and patients expectations with respect to the quality and functionality of the products will remain high. The challenge facing the manufacturers and suppliers of diabetes care products is to make high-quality and innovative products available with a much higher level of efficiency. Ypsomed has decades of experience, combined with a recognized solid reputation and expertise in the field of diabetes. Thanks to the comprehensive range of products and services available under the mylife Diabetescare umbrella brand, Ypsomed is able to offer health insurance providers and insurance companies attractive allinclusive packages and to bundle individual product categories. With its own subsidiaries in Europe and India, direct distribution through DiaExpert and mylife Direct, as well as via local distribution partners in more than 50 countries, Ypsomed is represented internationally in markets with strong growth. In the 2012/13 business year, Ypsomed also strengthened its Diabetescare management team through the appointment of experienced managers and diabetes specialists with many years of experience. Dr. Eberhard Bauer has been at the head of the sales companies in the Ypsomed Group since July 2012 and Alexander Wetzlich has taken over responsibility for the Diabetescare product management at Ypsomed. 26

39 Ypsomed Annual Report mylife Unio blood glucose meter enjoy innovation Start of the market launch of the newly developed mylife Unio mylife Unio blood glucose meter Annual Report Ypsomed, in collaboration with partners, developed the mylife Unio blood glucose meter based on the needs of both diabetes patients and specialist medical staff, and the European market launch of this product started in spring The flat, ultra-compact and yet powerful blood glucose meter is impressive, with highly accurate and precise measurement values, thanks to new test strip technology and autocoding. The mylife Unio compact set includes test strips in an ultraflat storage box, as well as the newly developed mylife AutoLance, a highly precise lancing device with an automatic loading and release function for swift, low-pain blood sampling. The mylife Unio was first launched in France in February 2013 and will be introduced in other European subsidiaries in the months that followed. Demanding market for blood glucose meters Although Ypsomed has successfully achieved continuous sales growth with blood glucose meters for many years, the market for blood glucose meters has changed significantly and has become even more competitive. Technical differentiation between the various devices has become more difficult and the number of competitors, especially the low-cost suppliers from Asia, has led to strong pressure on prices and lower margins. In order to lower the rising healthcare costs as much as possible, an increasing number of countries are conducting national and regional tender procedures for the procurement of blood glucose meters, further fueling the price wars between suppliers. A further common practice today is the provision of blood glucose meters free of charge, with the cost of the meter subsidized by means of the profitable test strips. Overall, the margins in the blood glucose meter market are still attractive, even though the average prices for test strips have dropped worldwide in recent years. Ypsomed wins the prestigious red dot design award for its mylife Unio We were delighted to receive the internationally recognized red dot design award for the mylife Unio blood glucose meter. The jury considered a total of 4662 projects submitted from 54 countries. This is the second time that Ypsomed, together with its partner Process Design from Lucerne, has won this international award, since it also received the red dot design award for the ServoPen. The mylife Unio blood glucose meter is particularly practical for diabetics, because they can record their blood glucose values quickly and discreetly in the mylife SmartCase. 27

40 Ypsomed Annual Report Ypsomed pen needles a 20-year-old success story The early days and the first pen needles In 1992, Ypsomed or Disetronic as it was then developed the first pen needle for the highly successful Optipen insulin pen. The pen needle was initially marketed exclusively by the German pharmaceutical group Hoechst (now Sanofi) and was very well received by customers. A special clean room had to be built at Brunnmattstrasse 6 in Burgdorf for the manufacture of the new pen needles. The production quantities of just a few hundred thousand needles were still very small at that stage. The enormous growth potential of this attractive market quickly became apparent and this led to the development of new pen needles. Ypsomed started the production of special needles for pen systems in 1992 and is celebrating its 20th anniversary this year. Patented pen needles by Ypsomed 1996 marked the start of the development of the Penfine needle with investment in a second product line. With increasing success on the market, further expansion of production became necessary, and this was implemented in the year 2000 with the procurement of a new assembly system in the extended clean room in Burgdorf. Ypsomed recognized the market opportunities associated with a pen needle for universal use at a very early stage and therefore developed the patented Penfine universal click pen needle. Unlike all other conventional pen needles, this pen needle did not have a screw connector, but could instead simply be clicked onto any of the common pen systems on the market. Rapid development billions of pen needles from Switzerland Ypsomed therefore continuously expanded its pen needle range, introducing, for example, the Optifine pen needle in 2004 and, in 2010, the Clickfine pen needle and the Clickfine AutoProtect safety needle, which is particularly wellsuited to use in hospitals and nursing facilities. In the 2012/13 business year, Ypsomed extended its pen needle range by adding the 4 mm needle size. The Ypsomed pen needles are now available in five different lengths (4, 6, 8, 10 and 12 mm) and are sold worldwide under the Ypsomed mylife Diabetescare umbrella brand or as private label products under the brand name of major partner companies. Alongside the constant expansion of the product range, production capacity has also been repeatedly extended in stages. In 2004, the new assembly system was put into operation and the new clean rooms in Solothurn were completed in Production in Solothurn did not go exactly as planned at the outset and complex optimization was required. Consequently, it was all the more gratifying when a further assembly system was successfully put into operation in Expansion and concentration of pen needle production in Solothurn In order to satisfy the growing demand for pen needles on attractive terms, Ypsomed is dependent on the highly efficient manufacture of the needles. In the 2012/13 business year, injection molding capacity was therefore expanded and an order was placed for a further needle assembly system, which is due to be put into operation over the next few months. With these investments, Ypsomed is expanding its production capacity in Solothurn by a substantial 40% and is therefore showing that it is clearly committed to Switzerland for manufacturing. Furthermore, Ypsomed is planning to concentrate its entire production of pen needles at the Solothurn site during the course of This will make it possible to take advantage of synergies and to cut costs. 28

41 Ypsomed Annual Report The future market development for pen needles Annual Report Thanks to the increasing use of pen systems worldwide and in the newly industrialized countries in particular, Ypsomed believes that there is growth potential (10 20% per year) for the high-quality pen needles manufactured in Switzerland. There is further potential for growth by reducing the multiple use of pen needles by means of campaigns to provide information and raise awareness about the risks of infection and the other health risks associated with the repeated use of pen needles. In the future, Ypsomed will focus on actively cultivating existing markets, with the specific aim of increasing its market shares in these markets. New markets will be developed selectively provided that the conditions appear attractive either by Ypsomed itself or through partners. A noticeable rise in the pressure on prices has been observed in recent years in the pen needle market. One reason for this is cuts in healthcare spending and a lower level of reimbursement by health insurance providers, while a second reason is the aggressive price policy adopted by both existing and new competitors. It is therefore all the more important for Ypsomed to make the production of its high-quality pen needles even more efficient and economical. Successful pen needle milestones Production volume Expansion of assembly systems and Optifine pen needles Pen needles: Clickfine and AutoProtect Putting the clean rooms in Solothurn into operation Expansion of capacity in Solothurn Centralization of pen needle production in Solothurn Optipen pen needle Penfine pen needle Expansion of assembly systems Future 29

42 Ypsomed Annual Report mylife OmniPod the only tubing-free insulin pump on the market Sales of the mylife OmniPod insulin patch pump double In the 2012/13 business year, Ypsomed achieved a real breakthrough with the mylife OmniPod insulin patch pump. Compared to the previous year, sales increased by more than 90%. This near-doubling of sales can largely be attributed to intensive cultivation of existing markets, the introduction of the pump to new countries, the launch of the second generation pump and the high level of acceptance amongst patients. Although the OmniPod has already been tested in several studies in the USA and Germany, the French authorities are insisting on a study so that the product can be reimbursed. It is planned to start the study in the first half of The increase in the mylife OmniPod market share in the Netherlands, UK and Switzerland to the current figure of nearly 10% is particularly pleasing. Successful distribution now achieved in seven countries in Europe Ypsomed has made substantial investment in the marketing and distribution of the mylife OmniPod in Europe, which is paying off. Thanks to the training of specialist staff and the certification of diabetes centers for the mylife OmniPod in addition to a presence at European and international diabetes congresses, the innovative, tubing-free patch pump is well-known and, most importantly, held in high regard by diabetics and physicians alike. The mylife OmniPod insulin pump is available in Germany, UK, Switzerland, the Netherlands and Austria and, since the beginning of 2013, it has also been available in Sweden and Norway. Unfortunately, the market launch in France has been delayed due to a requirement to conduct an additional and comprehensive clinical study with the mylife OmniPod in France itself. Extension and prolongation of the distribution rights for the mylife OmniPod As well as the sharp rise in sales, a further particularly gratifying development is the extension of the exclusive distribution rights for the mylife OmniPod to now cover a total of 25 countries in Europe, the Middle East and Asia. At the same time, Ypsomed has successfully extended the duration of the exclusive distribution rights to 2016 and beyond that by a further two years provided that certain conditions are met. Milestones from the history of insulin pump treatment 1920s The use of insulin to treat diabetes began in the 1920s. Banting and Best treated the first patient with insulin in s Until well into the 1970s, patients used a full set of glass syringes, cannulas and ampules. At the end of the 1960s, the first test strip device for measuring blood glucose was developed. Until that time, the measurement had always been urine-based. 30

43 Ypsomed Annual Report Annual Report mylife OmniPod NEW The compact, secondgeneration mylife OmniPod patch pump is a hit Insulet Corp. received CE registration in April 2012 and Ypsomed successfully introduced the new pod in Germany, UK, the Netherlands and Switzerland in stages during the 2012/13 business year. The transition to the second generation should be complete in all European distribution countries by the fall of Ypsomed has been distributing the mylife OmniPod insulin patch pump the only tubing-free insulin pump in the world available on the market in Europe with great success since Late 1970s The first insulin pump prototypes were developed and tested. The Mill Hill infuser and the 6C auto-syringe were the first insulin pumps on the market. Strictly speaking, these were conventional hospital pumps previously used to treat pain. 1980s In the mid-1980s, the first portable insulin pumps were launched, e.g. the H-Tron MRS-1 Micro by Disetronic in Europe. The H-Tron MRS-1 was the first insulin pump which enabled the basal rate to be programmed hourly. It was launched in

44 Ypsomed Annual Report The new insulin pump from Ypsomed small and smart The new insulin pump from Ypsomed What makes this insulin pump unique? The insulin pump wins customers over with its compact, functional and elegant design. Thanks to its compact size, it is lightweight and discreetly portable, but it fits comfortably in your hand and is safe and easy to use thanks to the highcontrast touchscreen panel (similar to that of an iphone). The user-friendly pump is operated by means of distinctive menu icons and can be set up ready for use in just a few steps. The new insulin pump uses a standard pre-filled insulin ampule and the level of insulin left in the ampule can be checked at any time thanks to the transparent window on the side. A standard battery supplies the power. The design, development and manufacture are all Swiss Made, thereby guaranteeing a high-quality, user-friendly product. The new insulin pump is used in conjunction with an Orbit infusion set. Innovative in-house development by Ypsomed An in-house development team at Ypsomed has been working on the development of an innovative insulin pump for several years now. The specifications set by founder Willy Michel posed major challenges for the engineers: the aim of the new product was to develop an affordable, user-friendly insulin pump, on the basis of established technology, which meets all of the key needs of insulin pump patients. The result of these years of development is extremely promising. During the 2012/13 business year, the development went according to plan, with the result that a gradual market launch will take place from the second half of When developing its own insulin pump, Ypsomed specifically aimed to avoid the high complexity of traditional insulin pumps, opting instead to streamline its functions to the essential features and to greatly simplify the use of the pump. Milestones from the history of insulin pump treatment 1990s Technological progress resulted in decrease in the size of insulin pumps. In the 1990s, Disetronic introduced the H-Tron V100 Panomat and Dahedi insulin pumps onto the market In 2000, Disetronic launched the D-Tron and D-Tron Plus insulin pumps for 3 ml pre-filled insulin cartridges. This generation of insulin pumps was not only optimized in terms of size, but also offered many technical refinements with the associated benefits for the pump user. 32

45 Ypsomed Annual Report mylife Orbit infusion set freely rotates 360 Successful transfer of the production of the Orbit infusion set mylife Orbit infusion set Annual Report With its acquisition of the infusion set business of ICU Medical Inc. in the 2011/12 business year, Ypsomed also took over the manufacture of infusion sets. In the 2012/13 business year, production was transferred, as planned, from ICU Medical Inc. to the OmniGroup and relocated to Mexico. The OmniGroup is a subsidiary of the listed company Adval Tech Holding AG, which has been a partner of Ypsomed for many years. A clean room was built at the new site in Querétaro, close to Mexico City, and production started in January Product management was transferred to Burgdorf during Marketing of the mylife Orbit infusion set started in the second half of the business year. New distribution contracts in Canada and Saudi Arabia The strategic importance of the mylife Orbit infusion set for the Ypsomed insulin pump During the 2012/13 business year, Ypsomed also signed new distribution contracts for the Orbit infusion set, including with Insulinpumps Inc. in Canada, which has its own customer service team specialized in diabetes, and with Tamer in Saudi Arabia. The diabetes markets in both Canada and Saudi Arabia are of great interest. In Canada, there are currently more than 9 million people living with diabetes and approximately 250,000 of these people are type 1 diabetics. In Saudi Arabia, more than 20% of the general population has diabetes, which is one of the highest rates of diabetes worldwide. As an integral accessory, the Orbit infusion set is of major strategic importance to the success of the planned market launch of the Ypsomed insulin pump. The proprietary rights with respect to patents for the infusion sets and the control of production costs are critical in order to enable Ypsomed to supply customers with a high-quality and yet reasonably priced insulin pump system. An Orbit infusion set is also being specially developed for the launch of the insulin pump From 2010, Ypsomed took on the European distribution of the world s first insulin patch pump, the OmniPod. The mylife OmniPod continues to be the only patch pump available on the market. Ypsomed will remain the exclusive distributor until at least Ypsomed plans to launch its own insulin pump from The key features of this in-house development are its simple and intuitive operation via the touchscreen and the pre-filled insulin cartridge. 33

46 Ypsomed Sustainability Report Sustainability and social responsibility Economic, ecological and social responsibility The name Ypsomed is derived from ipso (Latin for self ) and med (for medication), and reflects Ypsomed s expertise and vision. Ypsomed solutions make self-care simpler and easier. The company name also epitomizes Ypsomed s core business: Ypsomed offers products and services that enable patients to administer their own drugs safely and easily. Ypsomed supplies self-injection and diagnosis systems that help millions of people, many of whom are living with diabetes mellitus, to achieve the best possible quality of life. Ypsomed s mission is therefore as follows: With our innovative, user-friendly and reliable products and our modern care concepts, we make a major contribution towards successful treatment and the best possible quality of life. When it comes to implementing its vision and mission, Ypsomed takes a long-term and entrepreneurial approach. Ypsomed focuses on the needs of patients and customers, such as pharmaceutical companies, physicians and other specialist medical staff. Moreover, Ypsomed believes that it equally has obligations to employees, society and the environment, and it therefore always takes account of economic, ecological and social aspects when making decisions. Vocational training for employees Ypsomed is seeking apprentices for technical professions At Ypsomed, the active support of vocational training is of major importance, because this provides the company with well-trained up-and-coming specialist staff with the relevant knowledge and skills. Over the last ten years, Ypsomed has therefore increased both the number of apprenticeships on offer and the range of vocational disciplines available (see chart). In addition to traditional apprenticeships in the commercial sector, logistics and IT, Ypsomed is also seeking technically gifted apprentices to train as design engineers, multi-skilled mechanics and plastics engineers with a Swiss Federal vocational diploma. Sustainability Report Apprentices in the Ypsomed Group Number of apprentices graduating apprentices apprentices kept on as employees 35

47 Ypsomed Sustainability Report Ypsomed is looking to recruit apprentices not only in the areas of IT, logistics and commerce, but also, and especially, technically gifted design engineers, multi-skilled mechanics and plastics engineers. Vocational qualification leading to career opportunities During the 2012/13 business year, 11 apprentices successfully completed their training, outperforming the national average in Switzerland. Ypsomed was able to keep five of these 11 apprentices on as employees. Ypsomed again received more than 300 applications for the apprenticeship places on offer during the last business year. Despite this, however, it has become increasingly difficult to fill the apprenticeship places. This is due firstly to a lack of knowledge and skills on the part of the applicants (including in the fields of IT and commerce) and, secondly, to the fact that certain professions, such as that of plastics engineer, are not well known by school leavers. In August 2012, seven new apprentices started their basic vocational training at Ypsomed, a figure which is lower than in previous years. In total, Ypsomed is currently employing 38 apprentices in six different vocational areas. Employee education and training Ongoing training Ongoing training for employees is essential for a medical technology company such as Ypsomed. Many external and internal training courses were provided for Ypsomed employees in important areas such as quality management, safety, IT and human resources management. Human resources development through management, project management and specialist careers With regard to human resources development, three career path models management, project management and specialist careers have proven an effective approach. During the 2012/13 business year, 32 employees (5% of employees) have progressed to a new role in line with one of the three career path models. Just over half of these employees (17 people) are pursuing a specialist career, a third (11 people) have taken on a management position and four people qualified as project managers. This shows that the various management positions offer attractive promotion prospects for talented employees. The possibility of pursuing a career path as a specialist or a project manager offers new career opportunities at Ypsomed for technical experts in particular. Rise in employee satisfaction Employee surveys, which are conducted regularly and systematically, are an important part of Ypsomed s corporate culture and are a valuable feedback and management tool for employees and managers alike. Ypsomed therefore conducted its sixth employee survey between November 14 and December 14, For the second time, this survey was conducted at Group level. The response rate, at 85%, was once again very high (84% in 2010) and was above the average for Swiss companies. The graph shows that, since the last survey was conducted, there has been a rise in the scores for important parameters such as satisfaction, identification and bond with the company, commitment, and motivation. The employees also rated the organizational framework conditions and management significantly more highly than two years ago. The employee survey reveals that there is no urgent need for action, but Ypsomed will nevertheless continue to work hard to be an attractive employer. 36

48 Ypsomed Sustainability Report Results of the Ypsomed employee surveys Scored on a 100-point scale Ypsomed AG: Sustainability Report Satisfaction I m happy with my current job situation. Identification I have a strong sense of belonging to this company. Bond I care a lot about the future of this company. Attractive employment conditions and a family-friendly environment Attractive employment conditions and a family-friendly working environment are important factors if an employer wants to attract and retain well-trained, motivated employees. Ypsomed is able to offer this thanks to flexible working hours with part-time work, a set annual working time and the option of unpaid leave. Mothers and fathers particularly appreciate the parental leave available as well as the financial contributions to childcare. Compared with the rest of the industry, the Ypsomed workforce is relatively young, with an average age of % of employees have a family with children. In the last business year alone, Ypsomed employees celebrated 19 births. Ypsomed attaches great importance to equal opportunities and a familyfriendly corporate culture. Daycare center in Burgdorf for the children of Ypsomed employees For the children of Ypsomed employees at the Burgdorf site, places are available at the KITA Bucher Areal daycare center. The parents are delighted to have access to the facility, so it is not surprising that all of the places are currently taken. The Bucher Areal daycare center in Burgdorf is run by the LeoLea organization. The innovative LeoLea organization is enjoying steady growth. In addition to daycare centers for pre-school children ( Kitas ), it also runs daycare centers for school children, wrap-around care for school children in close cooperation with the school and, its most recent development, daycare centers for both pre-school and school children (for more information, please visit The Ypsomed Innovation Fund Foundation, which is supported by annual contributions from Ypsomed, helped the non-profit LeoLea organization out with a loan when it started up. 37

49 Ypsomed Sustainability Report Swiss Paralympic / Daniel Streit Equal opportunities Ypsomed attaches great importance to equal opportunities and therefore also offers jobs to older people and people with a disability. Ypsomed employee Sara Tretola wins an Olympic diploma at the Paralympics 2012 in London. One example is Sara Tretola. One hand one goal London 2012 this was Sara Tretola s vision as she spent four years preparing for the Paralympics 2012 in London. A passionate racing cyclist, Sara was born without a right forearm. She has learned to live with her disability and would not be put off pursuing a unique professional and sporting career. Ypsomed is proud to be able to offer Sara Tretola a suitable working environment and to support both her professional and sporting targets. Sara works as a Design Engineer in the development team for pen systems at Ypsomed with an 80% part-time contract, while also training for hours per week. Her hard work has paid off: on September 5, 2012, Sara Tretola achieved an excellent 8th place in the individual time trial over 16 kilometers her favorite discipline. She has already set herself a new target for 2013: Sara, along with four of her Ypsomed colleagues, will be taking part in the six-day Swiss Gigathlon from July 8 to 13, You can find out more about Sara at Sara Tretola during the time trial at the Paralympics 2012 in London Development of the staffing structure As of March 31, 2013, the Ypsomed Group employed a total staff of 764 in Switzerland and 251 abroad. In the 2012/13 business year, Ypsomed had to lay off 30 employees for economic reasons. The staff affected were supported with a redundancy program and a Group-wide redeployment scheme with opportunities to take stock and consider new directions. These measures enabled the employees to find a new job more quickly and also succeeded in reducing the number of days of sick leave during the redundancy notice period and minimizing the economic consequences of the redundancies. Success in promoting occupational health and safety Strategic program bears fruit In 2006, the Ypsomed Group launched a strategic program to promote and improve occupational health and safety with the following goals: To reduce both the number of occupational accidents and their severity To reduce the number of both non-occupational accidents and absences due to sickness To raise awareness among employees about the importance of actively looking after their health To make managers aware of the need to set an example and take responsibility As part of this program, Ypsomed laid the necessary cultural and structural foundations and successfully implemented these by means of active leadership, cooperation and training. Although not all of the targets have been achieved yet, the results over recent years have shown that the efforts and the investment of a five-figure sum have already paid off in terms of the improved health and safety of Ypsomed employees. The number of days of absence due to sickness and accidents has been successfully reduced from 12.2 days (in the 2006 calendar year) to the current figure of 7.4 days (in the 2012 calendar year). This equates to a reduction of 4.8 days per person per year. 38

50 Ypsomed Sustainability Report Numerous health promotion measures Ypsomed also takes action to improve health by continually improving workplace ergonomics and offering its permanent employees free entry to the local indoor swimming pool and gym, as well as by offering preventive flu vaccinations each year for all employees. At Ypsomed, employees have to pay to park their cars, with the aim of encouraging employees to use public transport or to walk or cycle to work. Ypsomed took part in the bike to work campaign again this year. Ypsomed also actively supports employees initiatives with regard to corporate sports events, as well as the participation by various Ypsomed teams in the Gigathlon. Partnership with the International Diabetes Federation Europe Since the beginning of 2013, Ypsomed has been supporting the International Diabetes Federation, IDF Europe, as one of its partners. The aim of this partnership is to help fight diabetes, primarily in regard to its improved treatment, together with prevention and education. The IDF is a global organization with 200 national diabetes associations in around 160 countries and it represents the interests of people with diabetes. IDF works in close cooperation with the UN and organizes the World Diabetes Day on November 14 each year. Diabetes is assuming epidemic proportions worldwide and there is no sign of this growth coming to an end. Ypsomed supports Dream Trust in India Dream Trust was set up in 1995 by Dr. Sharad Pendsey and his wife Swati in order to provide free medical care to impoverished children and adults suffering from diabetes in and around Nagpur (India). The team, with voluntary female nurses, diabetes assistants and physicians, is currently providing care for just under 500 impoverished patients with diabetes (regardless of religious denomination or caste). Ypsomed has been supporting Dream Trust since 2005, helping to provide insulin and diabetes treatment for diabetics who could not otherwise afford it. Dream Trust also attaches great importance to providing a school education for children, especially girls and women with diabetes, who are the particular victims of serious social, cultural and economic discrimination in India, because it is almost impossible to arrange a marriage for them as is common practice in India when they are older. The latest Dream Trust initiative is a bicycle project that provides sponsored children with a bicycle, thus enabling them to travel to school independently. If you would also like to support the work of Dream Trust, please visit for further information. Dream Trust in India Sustainability Report 39

51 Ypsomed Sustainability Report Ypsomed s regional commitment In terms of corporate social responsibility activities, Ypsomed is involved at an international level, as demonstrated by the examples of Dream Trust in India or the partnership with the International Diabetes Federation, IDF Europe. However, Ypsomed is also highly active in Switzerland itself and donates around 1% of its consolidated net profit in order to provide financial support for associations and events in the Burgdorf, Solothurn and Grenchen region in the areas of social and cultural affairs, specialist training and sports for all. Ypsomed is also one of the sponsors of the Franz Gertsch Museum in Burgdorf, the popularity of which extends far beyond the town itself. Ypsomed Innovation Fund For many years, Ypsomed has been making financial contributions to the Ypsomed Innovation Fund, which aims to promote innovative enterprises in the Swiss Mittelland region and to support project funding in different industries for new and recent start-up companies as well as for existing enterprises. The YPSOMED INNOVATION PRIZE, which is worth CHF and which aims to promote knowledge and technology transfer by universities in the Swiss Mittelland region, was awarded for the sixth time in January The jury of volunteers is composed of Willy Michel, Dr. h. c., Chairman of the Board of Directors of Ypsomed Holding AG (Chair), Hanspeter Gerber, certified auditor, Head of PwC s Bern/Thun office, Peter Kappeler, qualified engineer (ETH)/ MBA INSEAD, Daniel Kusio, lic. rer. pol., Heinrich Mühlemann, qualified engineer (ETH)/lic. oec. publ., and Peter Mürner, Prof. Dr. phil. nat. have been in use for 30 years now, there has been no real further development of the surgical implantation procedure. A sizeable hole is drilled in the patient s skull bone behind the ear (known as the petrous bone) in order to allow access to the middle ear and the cochlea and the electrode can then be inserted into the cochlea through this hole. For more than four years, the ARTORG Center for Biomedical Engineering at the University of Bern, under the direction of Prof. Dr. Ing. Stefan Weber, and the Department for ENT, Head and Neck Surgery at the Inselspital Bern University Hospital, under the direction of Prof. Dr. med. Marco Caversaccio, have been conducting research into a new minimally invasive surgical procedure that enables the cochlear implant to be inserted via a drilled hole of just 1.5 millimeters. To this end, Brett Bell, PhD, and his team have developed a highly precise navigation system and a surgical robot that allows for a new form of surgical procedure unknown anywhere else in the world and that offers a level of precision and safety which has never before been achieved. In collaboration with the Bern-based company CAScination AG, there are plans to develop a system for commercial use which, in the medium term, would allow for cochlear implant surgery to be performed as an outpatient procedure with less trauma for the patient and which would also result in lower treatment costs overall winner of the Ypsomed innovation prize The jury awarded the top prize to Brett Bell, PhD, from the ARTORG Center for Biomedical Engineering at the University of Bern for his project to develop a surgical robotic system for minimally invasive cochlear implantation. It is estimated that around a billion people worldwide are affected by a hearing impairment. In order to enable patients who are completely deaf or severely hard of hearing to hear, cochlear implants are used with great success. These implants provide the patient with a sense of sound by directly stimulating the cochlear nerve cells. Although implants of this kind 40

52 Ypsomed Sustainability Report Environment Ypsomed provides training to raise employees awareness of the subject of the environment and actively endeavors to improve Ypsomed s energy efficiency on an ongoing basis. Ypsomed s most important environmental key data for the calendar years 2007 to 2012 is listed below, with comments. The environmentally sensitive use of energy and resources is extremely important to Ypsomed, especially when it comes to making decisions about investing in fixed assets, operating infrastructure and buildings. Energy in gigajoules (GJ) Natural gas 0.91% Heating oil 88.50% Electricity 1.92% Sustainability Report Energy use continually reduced Overall, compared to other companies or industries, Ypsomed requires very little energy to manufacture its products or supply its services. Nevertheless, Ypsomed endeavors to keep its total energy use as low as possible and to reduce it further where it can. Over the last five years, Ypsomed has introduced targeted measures in this area with considerable success, as the chart opposite shows. In the 2012 calendar year, just like in the previous year, Ypsomed again reduced its total energy use by 1.8%. By switching to natural gas at the Brunnmatt production site, the use of heating oil was reduced by as much as 89%, with a figure of just 115 gigajoules (GJ) in 2012, compared to 1000 GJ in the previous year. At all sites, heating oil is now only used instead of natural gas in an emergency. Despite this switch from heating oil to natural gas, there has only been a small 1% rise in the use of natural gas. The amount of electricity used has also been successfully reduced by 2% from GJ to GJ. Investments that have been made to improve the energy footprint, such as the renewal of the heating system, the renovation of buildings and building services technology and the introduction of energy-efficient injection molding machines, are resulting in tangible cost savings and also make good sense environmentally. Overall, compared to other sectors or industries, production at Ypsomed uses very little in the way of energy and natural resources. International presence having an effect on business travel In 2012, business travel at Ypsomed, measured in the number of kilometers traveled, increased from the previous year s figure of 1.7 million to 2.1 million kilometers. Although journeys were optimized, resulting in a reduction of the kilometers traveled using our own vehicles by 18%, travel by plane and by vehicles belonging to Ypsomed employees increased by around 30% compared to the previous year. While Ypsomed s stronger international presence is inevitably leading to more air travel, there is undoubtedly still potential for improvement with regard to individual journeys made using employees own vehicles. Business travel (CH) in kilometers Own vehicles 18.42% Vehicles of employees 29.19% Air travel 30.34% 41

53 Ypsomed Sustainability Report Solar energy in Burgdorf In the Buchmatt industrial zone in Burgdorf, the total flat roof surface area of the 37 buildings is in the region of m2, or approximately 10 soccer pitches. Since this surface area is essentially well-suited to a solar park with photovoltaic panels on the buildings, Willy Michel, Chairman of the Board of Directors of Ypsomed, and Hans Ulrich Flückiger, owner of the power engineering company Febacom AG, have launched the Solarpark Buchmatt ( Buchmatt solar park ) project. The aim is to fit panels to as many roofs as possible and to generate a total of around 5 gigawatt hours of sustainable, carbon-neutral energy. By the final completion stage, it should be possible to generate a total of up to 9 gigawatt hours using the entire surface area, approximately 7.5% of the energy consumed within Burgdorf each year. Ypsomed intends to be involved in this project with the rented building at the Buchmatt site. Recycling project for the mylife OmniPod An increasing number of insulin pump users are opting for the unique mylife OmniPod insulin patch pump. Type 1 diabetes patients like the mylife OmniPod because this small pod, with enough insulin for up to three days, is stuck directly to the skin and, unlike conventional insulin pumps, does not require an infusion set with tubing. The flat, lightweight pod can be worn discreetly on many different places on the body and is replaced after around three days. The used pods are collected systematically by Ypsomed and are recycled in a proper, environmentally friendly way. Customers in all of the distribution countries can send the used pods back to Ypsomed in a recycling box which is supplied along with delivery and, what s more, this service is free of charge. The used pods are collected centrally in Switzerland and are then disassembled automatically by a partner company in the Solothurn area. The batteries are recycled separately and certain parts are processed in such a way that they can then be sold on as secondary raw materials. 42

54 Ypsomed Sustainability Report Sustainability and social responsibility Economic, ecological and social responsibility The name Ypsomed is derived from ipso (Latin for self ) and med (for medication), and reflects Ypsomed s expertise and vision. Ypsomed solutions make self-care simpler and easier. The company name also epitomizes Ypsomed s core business: Ypsomed offers products and services that enable patients to administer their own drugs safely and easily. Ypsomed supplies self-injection and diagnosis systems that help millions of people, many of whom are living with diabetes mellitus, to achieve the best possible quality of life. Ypsomed s mission is therefore as follows: With our innovative, user-friendly and reliable products and our modern care concepts, we make a major contribution towards successful treatment and the best possible quality of life. When it comes to implementing its vision and mission, Ypsomed takes a long-term and entrepreneurial approach. Ypsomed focuses on the needs of patients and customers, such as pharmaceutical companies, physicians and other specialist medical staff. Moreover, Ypsomed believes that it equally has obligations to employees, society and the environment, and it therefore always takes account of economic, ecological and social aspects when making decisions. Vocational training for employees Ypsomed is seeking apprentices for technical professions At Ypsomed, the active support of vocational training is of major importance, because this provides the company with well-trained up-and-coming specialist staff with the relevant knowledge and skills. Over the last ten years, Ypsomed has therefore increased both the number of apprenticeships on offer and the range of vocational disciplines available (see chart). In addition to traditional apprenticeships in the commercial sector, logistics and IT, Ypsomed is also seeking technically gifted apprentices to train as design engineers, multi-skilled mechanics and plastics engineers with a Swiss Federal vocational diploma. Sustainability Report Apprentices in the Ypsomed Group Number of apprentices graduating apprentices apprentices kept on as employees 35

55 Ypsomed Sustainability Report Ypsomed is looking to recruit apprentices not only in the areas of IT, logistics and commerce, but also, and especially, technically gifted design engineers, multi-skilled mechanics and plastics engineers. Vocational qualification leading to career opportunities During the 2012/13 business year, 11 apprentices successfully completed their training, outperforming the national average in Switzerland. Ypsomed was able to keep five of these 11 apprentices on as employees. Ypsomed again received more than 300 applications for the apprenticeship places on offer during the last business year. Despite this, however, it has become increasingly difficult to fill the apprenticeship places. This is due firstly to a lack of knowledge and skills on the part of the applicants (including in the fields of IT and commerce) and, secondly, to the fact that certain professions, such as that of plastics engineer, are not well known by school leavers. In August 2012, seven new apprentices started their basic vocational training at Ypsomed, a figure which is lower than in previous years. In total, Ypsomed is currently employing 38 apprentices in six different vocational areas. Employee education and training Ongoing training Ongoing training for employees is essential for a medical technology company such as Ypsomed. Many external and internal training courses were provided for Ypsomed employees in important areas such as quality management, safety, IT and human resources management. Human resources development through management, project management and specialist careers With regard to human resources development, three career path models management, project management and specialist careers have proven an effective approach. During the 2012/13 business year, 32 employees (5% of employees) have progressed to a new role in line with one of the three career path models. Just over half of these employees (17 people) are pursuing a specialist career, a third (11 people) have taken on a management position and four people qualified as project managers. This shows that the various management positions offer attractive promotion prospects for talented employees. The possibility of pursuing a career path as a specialist or a project manager offers new career opportunities at Ypsomed for technical experts in particular. Rise in employee satisfaction Employee surveys, which are conducted regularly and systematically, are an important part of Ypsomed s corporate culture and are a valuable feedback and management tool for employees and managers alike. Ypsomed therefore conducted its sixth employee survey between November 14 and December 14, For the second time, this survey was conducted at Group level. The response rate, at 85%, was once again very high (84% in 2010) and was above the average for Swiss companies. The graph shows that, since the last survey was conducted, there has been a rise in the scores for important parameters such as satisfaction, identification and bond with the company, commitment, and motivation. The employees also rated the organizational framework conditions and management significantly more highly than two years ago. The employee survey reveals that there is no urgent need for action, but Ypsomed will nevertheless continue to work hard to be an attractive employer. 36

56 Ypsomed Sustainability Report Results of the Ypsomed employee surveys Scored on a 100-point scale Ypsomed AG: Sustainability Report Satisfaction I m happy with my current job situation. Identification I have a strong sense of belonging to this company. Bond I care a lot about the future of this company. Attractive employment conditions and a family-friendly environment Attractive employment conditions and a family-friendly working environment are important factors if an employer wants to attract and retain well-trained, motivated employees. Ypsomed is able to offer this thanks to flexible working hours with part-time work, a set annual working time and the option of unpaid leave. Mothers and fathers particularly appreciate the parental leave available as well as the financial contributions to childcare. Compared with the rest of the industry, the Ypsomed workforce is relatively young, with an average age of % of employees have a family with children. In the last business year alone, Ypsomed employees celebrated 19 births. Ypsomed attaches great importance to equal opportunities and a familyfriendly corporate culture. Daycare center in Burgdorf for the children of Ypsomed employees For the children of Ypsomed employees at the Burgdorf site, places are available at the KITA Bucher Areal daycare center. The parents are delighted to have access to the facility, so it is not surprising that all of the places are currently taken. The Bucher Areal daycare center in Burgdorf is run by the LeoLea organization. The innovative LeoLea organization is enjoying steady growth. In addition to daycare centers for pre-school children ( Kitas ), it also runs daycare centers for school children, wrap-around care for school children in close cooperation with the school and, its most recent development, daycare centers for both pre-school and school children (for more information, please visit The Ypsomed Innovation Fund Foundation, which is supported by annual contributions from Ypsomed, helped the non-profit LeoLea organization out with a loan when it started up. 37

57 Ypsomed Sustainability Report Swiss Paralympic / Daniel Streit Equal opportunities Ypsomed attaches great importance to equal opportunities and therefore also offers jobs to older people and people with a disability. Ypsomed employee Sara Tretola wins an Olympic diploma at the Paralympics 2012 in London. One example is Sara Tretola. One hand one goal London 2012 this was Sara Tretola s vision as she spent four years preparing for the Paralympics 2012 in London. A passionate racing cyclist, Sara was born without a right forearm. She has learned to live with her disability and would not be put off pursuing a unique professional and sporting career. Ypsomed is proud to be able to offer Sara Tretola a suitable working environment and to support both her professional and sporting targets. Sara works as a Design Engineer in the development team for pen systems at Ypsomed with an 80% part-time contract, while also training for hours per week. Her hard work has paid off: on September 5, 2012, Sara Tretola achieved an excellent 8th place in the individual time trial over 16 kilometers her favorite discipline. She has already set herself a new target for 2013: Sara, along with four of her Ypsomed colleagues, will be taking part in the six-day Swiss Gigathlon from July 8 to 13, You can find out more about Sara at Sara Tretola during the time trial at the Paralympics 2012 in London Development of the staffing structure As of March 31, 2013, the Ypsomed Group employed a total staff of 764 in Switzerland and 251 abroad. In the 2012/13 business year, Ypsomed had to lay off 30 employees for economic reasons. The staff affected were supported with a redundancy program and a Group-wide redeployment scheme with opportunities to take stock and consider new directions. These measures enabled the employees to find a new job more quickly and also succeeded in reducing the number of days of sick leave during the redundancy notice period and minimizing the economic consequences of the redundancies. Success in promoting occupational health and safety Strategic program bears fruit In 2006, the Ypsomed Group launched a strategic program to promote and improve occupational health and safety with the following goals: To reduce both the number of occupational accidents and their severity To reduce the number of both non-occupational accidents and absences due to sickness To raise awareness among employees about the importance of actively looking after their health To make managers aware of the need to set an example and take responsibility As part of this program, Ypsomed laid the necessary cultural and structural foundations and successfully implemented these by means of active leadership, cooperation and training. Although not all of the targets have been achieved yet, the results over recent years have shown that the efforts and the investment of a five-figure sum have already paid off in terms of the improved health and safety of Ypsomed employees. The number of days of absence due to sickness and accidents has been successfully reduced from 12.2 days (in the 2006 calendar year) to the current figure of 7.4 days (in the 2012 calendar year). This equates to a reduction of 4.8 days per person per year. 38

58 Ypsomed Sustainability Report Numerous health promotion measures Ypsomed also takes action to improve health by continually improving workplace ergonomics and offering its permanent employees free entry to the local indoor swimming pool and gym, as well as by offering preventive flu vaccinations each year for all employees. At Ypsomed, employees have to pay to park their cars, with the aim of encouraging employees to use public transport or to walk or cycle to work. Ypsomed took part in the bike to work campaign again this year. Ypsomed also actively supports employees initiatives with regard to corporate sports events, as well as the participation by various Ypsomed teams in the Gigathlon. Partnership with the International Diabetes Federation Europe Since the beginning of 2013, Ypsomed has been supporting the International Diabetes Federation, IDF Europe, as one of its partners. The aim of this partnership is to help fight diabetes, primarily in regard to its improved treatment, together with prevention and education. The IDF is a global organization with 200 national diabetes associations in around 160 countries and it represents the interests of people with diabetes. IDF works in close cooperation with the UN and organizes the World Diabetes Day on November 14 each year. Diabetes is assuming epidemic proportions worldwide and there is no sign of this growth coming to an end. Ypsomed supports Dream Trust in India Dream Trust was set up in 1995 by Dr. Sharad Pendsey and his wife Swati in order to provide free medical care to impoverished children and adults suffering from diabetes in and around Nagpur (India). The team, with voluntary female nurses, diabetes assistants and physicians, is currently providing care for just under 500 impoverished patients with diabetes (regardless of religious denomination or caste). Ypsomed has been supporting Dream Trust since 2005, helping to provide insulin and diabetes treatment for diabetics who could not otherwise afford it. Dream Trust also attaches great importance to providing a school education for children, especially girls and women with diabetes, who are the particular victims of serious social, cultural and economic discrimination in India, because it is almost impossible to arrange a marriage for them as is common practice in India when they are older. The latest Dream Trust initiative is a bicycle project that provides sponsored children with a bicycle, thus enabling them to travel to school independently. If you would also like to support the work of Dream Trust, please visit for further information. Dream Trust in India Sustainability Report 39

59 Ypsomed Sustainability Report Ypsomed s regional commitment In terms of corporate social responsibility activities, Ypsomed is involved at an international level, as demonstrated by the examples of Dream Trust in India or the partnership with the International Diabetes Federation, IDF Europe. However, Ypsomed is also highly active in Switzerland itself and donates around 1% of its consolidated net profit in order to provide financial support for associations and events in the Burgdorf, Solothurn and Grenchen region in the areas of social and cultural affairs, specialist training and sports for all. Ypsomed is also one of the sponsors of the Franz Gertsch Museum in Burgdorf, the popularity of which extends far beyond the town itself. Ypsomed Innovation Fund For many years, Ypsomed has been making financial contributions to the Ypsomed Innovation Fund, which aims to promote innovative enterprises in the Swiss Mittelland region and to support project funding in different industries for new and recent start-up companies as well as for existing enterprises. The YPSOMED INNOVATION PRIZE, which is worth CHF and which aims to promote knowledge and technology transfer by universities in the Swiss Mittelland region, was awarded for the sixth time in January The jury of volunteers is composed of Willy Michel, Dr. h. c., Chairman of the Board of Directors of Ypsomed Holding AG (Chair), Hanspeter Gerber, certified auditor, Head of PwC s Bern/Thun office, Peter Kappeler, qualified engineer (ETH)/ MBA INSEAD, Daniel Kusio, lic. rer. pol., Heinrich Mühlemann, qualified engineer (ETH)/lic. oec. publ., and Peter Mürner, Prof. Dr. phil. nat. have been in use for 30 years now, there has been no real further development of the surgical implantation procedure. A sizeable hole is drilled in the patient s skull bone behind the ear (known as the petrous bone) in order to allow access to the middle ear and the cochlea and the electrode can then be inserted into the cochlea through this hole. For more than four years, the ARTORG Center for Biomedical Engineering at the University of Bern, under the direction of Prof. Dr. Ing. Stefan Weber, and the Department for ENT, Head and Neck Surgery at the Inselspital Bern University Hospital, under the direction of Prof. Dr. med. Marco Caversaccio, have been conducting research into a new minimally invasive surgical procedure that enables the cochlear implant to be inserted via a drilled hole of just 1.5 millimeters. To this end, Brett Bell, PhD, and his team have developed a highly precise navigation system and a surgical robot that allows for a new form of surgical procedure unknown anywhere else in the world and that offers a level of precision and safety which has never before been achieved. In collaboration with the Bern-based company CAScination AG, there are plans to develop a system for commercial use which, in the medium term, would allow for cochlear implant surgery to be performed as an outpatient procedure with less trauma for the patient and which would also result in lower treatment costs overall winner of the Ypsomed innovation prize The jury awarded the top prize to Brett Bell, PhD, from the ARTORG Center for Biomedical Engineering at the University of Bern for his project to develop a surgical robotic system for minimally invasive cochlear implantation. It is estimated that around a billion people worldwide are affected by a hearing impairment. In order to enable patients who are completely deaf or severely hard of hearing to hear, cochlear implants are used with great success. These implants provide the patient with a sense of sound by directly stimulating the cochlear nerve cells. Although implants of this kind 40

60 Ypsomed Sustainability Report Environment Ypsomed provides training to raise employees awareness of the subject of the environment and actively endeavors to improve Ypsomed s energy efficiency on an ongoing basis. Ypsomed s most important environmental key data for the calendar years 2007 to 2012 is listed below, with comments. The environmentally sensitive use of energy and resources is extremely important to Ypsomed, especially when it comes to making decisions about investing in fixed assets, operating infrastructure and buildings. Energy in gigajoules (GJ) Natural gas 0.91% Heating oil 88.50% Electricity 1.92% Sustainability Report Energy use continually reduced Overall, compared to other companies or industries, Ypsomed requires very little energy to manufacture its products or supply its services. Nevertheless, Ypsomed endeavors to keep its total energy use as low as possible and to reduce it further where it can. Over the last five years, Ypsomed has introduced targeted measures in this area with considerable success, as the chart opposite shows. In the 2012 calendar year, just like in the previous year, Ypsomed again reduced its total energy use by 1.8%. By switching to natural gas at the Brunnmatt production site, the use of heating oil was reduced by as much as 89%, with a figure of just 115 gigajoules (GJ) in 2012, compared to 1000 GJ in the previous year. At all sites, heating oil is now only used instead of natural gas in an emergency. Despite this switch from heating oil to natural gas, there has only been a small 1% rise in the use of natural gas. The amount of electricity used has also been successfully reduced by 2% from GJ to GJ. Investments that have been made to improve the energy footprint, such as the renewal of the heating system, the renovation of buildings and building services technology and the introduction of energy-efficient injection molding machines, are resulting in tangible cost savings and also make good sense environmentally. Overall, compared to other sectors or industries, production at Ypsomed uses very little in the way of energy and natural resources. International presence having an effect on business travel In 2012, business travel at Ypsomed, measured in the number of kilometers traveled, increased from the previous year s figure of 1.7 million to 2.1 million kilometers. Although journeys were optimized, resulting in a reduction of the kilometers traveled using our own vehicles by 18%, travel by plane and by vehicles belonging to Ypsomed employees increased by around 30% compared to the previous year. While Ypsomed s stronger international presence is inevitably leading to more air travel, there is undoubtedly still potential for improvement with regard to individual journeys made using employees own vehicles. Business travel (CH) in kilometers Own vehicles 18.42% Vehicles of employees 29.19% Air travel 30.34% 41

61 Ypsomed Sustainability Report Solar energy in Burgdorf In the Buchmatt industrial zone in Burgdorf, the total flat roof surface area of the 37 buildings is in the region of m2, or approximately 10 soccer pitches. Since this surface area is essentially well-suited to a solar park with photovoltaic panels on the buildings, Willy Michel, Chairman of the Board of Directors of Ypsomed, and Hans Ulrich Flückiger, owner of the power engineering company Febacom AG, have launched the Solarpark Buchmatt ( Buchmatt solar park ) project. The aim is to fit panels to as many roofs as possible and to generate a total of around 5 gigawatt hours of sustainable, carbon-neutral energy. By the final completion stage, it should be possible to generate a total of up to 9 gigawatt hours using the entire surface area, approximately 7.5% of the energy consumed within Burgdorf each year. Ypsomed intends to be involved in this project with the rented building at the Buchmatt site. Recycling project for the mylife OmniPod An increasing number of insulin pump users are opting for the unique mylife OmniPod insulin patch pump. Type 1 diabetes patients like the mylife OmniPod because this small pod, with enough insulin for up to three days, is stuck directly to the skin and, unlike conventional insulin pumps, does not require an infusion set with tubing. The flat, lightweight pod can be worn discreetly on many different places on the body and is replaced after around three days. The used pods are collected systematically by Ypsomed and are recycled in a proper, environmentally friendly way. Customers in all of the distribution countries can send the used pods back to Ypsomed in a recycling box which is supplied along with delivery and, what s more, this service is free of charge. The used pods are collected centrally in Switzerland and are then disassembled automatically by a partner company in the Solothurn area. The batteries are recycled separately and certain parts are processed in such a way that they can then be sold on as secondary raw materials. 42

62 Ypsomed Financial Report Consolidated financial results 2012/13 Operating profit maintained despite fall in sales In the 2012/13 business year, the Ypsomed Group achieved consolidated sales of goods and services worth CHF million, down 1.6% on the previous year. Despite a slight dip in sales, Ypsomed succeeded in increasing its gross profit from CHF 56.4 million to CHF 57.1 million during the 2012/13 business year, while keeping operating profit virtually constant at CHF 4.8 million. Net profit was lower in the 2012/13 business year, at CHF 1.6 million, due to the substantial gain of CHF 5.1 million on the sale of the stake in Insulet Corp. posted in the previous year. Delivery Devices segment at a turning point In the Delivery Devices segment, Ypsomed generated sales of goods and services worth CHF million in the 2012/13 business year, down 10.2% on the CHF million achieved in the previous year. As mentioned in last year s Annual Report, Ypsomed stopped supplying OptiSet pens to Sanofi in the 2012/13 business year. This also had an impact on the segment s profit figures, with Delivery Devices posting an operating profit of CHF 9.5 million as against CHF 13.8 million in the previous year. Ypsomed s Delivery Devices business has therefore clearly reached a turning point. Rising production volumes for pen systems for existing and new pharmaceutical customers will mean a trend to increased sales and improved profitability in the Delivery Devices segment in future. Particularly pleasing was the further growth in the volume of ServoPen insulin pens sold in the 2012/13 business year, and the fact that Ypsomed was able to significantly increase delivery volumes for components for the Sanofi SoloStar pen compared with the previous year. Ypsomed also recorded higher sales in its business with mylife Orbit infusion sets, which had been acquired during the previous business year. Strong growth in the Diabetes Direct business In the 2012/13 business year, Ypsomed increased sales of goods and services in its Diabetes Direct business by 16.9% from CHF 78.2 million to CHF 91.4 million. The Diabetes Direct business hence now accounts for 37.4% of the Ypsomed Group s total revenue (previous year: 31.5%). Evidently, the main reason behind this growth was the virtual doubling of mylife OmniPod insulin pump sales, as a result, inter alia, of the market launch of the second generation of the mylife OmniPod and of the expansion into new markets such as Austria and the Nordic countries. This tubeless insulin pump is proving very popular among patients and specialist physicians, as demonstrated by the sharp increase in the product s market-share. However, Ypsomed also succeeded in increasing sales of blood glucose meters in the 2012/13 business year, albeit to a lesser extent than originally planned due to the delayed launch of the mylife Unio system. The operating result improved in the 2012/13 business year from CHF -9.1 million in the previous year to CHF -2.9 million although the switch to the second generation of the mylife OmniPod and the launch of the mylife Unio had an adverse impact on costs in the period under review and the planned sales will be recorded later. Ypsotec sustains a loss The Others segment posted a fall in sales in the 2012/13 business year from CHF 17.0 million to CHF 15.3 million, a loss for the segment of CHF 1.7 million. The reason is, as a supplier of mechanical precision parts, Ypsotec is particularly exposed to the economic difficulties its customers are currently facing. To ensure Ypsotec remains competitive in future, a new production facility was built at the Tabor site in order to carry out labor-intensive work in the Czech Republic. Ypsotec s significant loss had a major impact on the Ypsomed Group s consolidated operating profit in the past business year. Operating profit margin on a par with previous year While administrative expenses and other operating expenses matched the previous year s figures at Group level, expenditure on sales and marketing increased slightly year-on-year from CHF 40.6 million to CHF 41.4 million due to the launch and switchover activities during the 2012/13 business year. Ypsomed posted a consolidated operating profit of CHF 4.8 million for the 2012/13 business year. Thus, the operating profit margin at EBIT level remained at virtually the same level as the previous year (2.0% compared with 2.1%) despite lower sales of goods and services. 43 Financial Report

63 Ypsomed Financial Report In the 2012/13 business year, financial expenses were on a par with the previous year at CHF 3.3 million, although financial income fell from CHF 8.0 million to CHF 1.5 million. As already mentioned, this was due to the non-recurring effect resulting from the gain on the sale of the stake in Insulet Corp. in the previous year in the amount of CHF 5.1 million. The dividend from the stake in Bionime Corporation was also CHF 1.0 million lower in the 2012/13 business year. Due to back taxes in Germany in the amount of CHF 0.6 million, tax expenses rose slightly year-on-year from CHF 1.2 million to CHF 1.4 million despite a fall in net profit. Gains on the sale of investments were also taxed on a privileged basis in the previous year. Ypsomed s net profit for the 2012/13 business year thus stood at CHF 1.6 million as against CHF 8.5 million in the previous year, resulting in a profit per share of CHF Key strategic investments During the past business year, Ypsomed once again invested strongly in research and development, particularly in developing its own insulin pump and new pen systems for pharmaceutical customers. At CHF 23.7 million, total expenditure on research and development was once again high, down only slightly on the previous year s CHF 25.2 million. During the 2012/13 business year, Ypsomed also invested CHF 15.9 million in new fixed assets, more than double the previous year s figure of CHF 7.5 million. At its Solothurn site, Ypsomed invested in an additional assembly line for pen needles and in production facilities for new pen systems. Cash flow from investing activities increased from CHF million in the previous year to CHF million in the 2012/13 business year. Cash flow from operating activities fell from CHF 31.1 million to CHF 15.2 million. assets increased from CHF 50.2 million to CHF 55.1 million due to costs for developing the company s own insulin pump and pen systems being capitalized. On the liabilities side, bank loans increased by CHF 18.0 million to CHF 64.5 million in the past business year. The remaining balance sheet items remained virtually unchanged from the previous year. Major shareholder Willy Michel extends his shareholder loan Willy Michel made a key contribution towards funding the investment in developing new products and the ongoing market launch of mylife Diabetescare products by extending his shareholder loan until the end of March CHF 4.5 million of the loan was repaid in the current business year. For the next business year, Willy Michel is to waive a CHF 5.0 million repayment. This has enabled the current liabilities to the major shareholder to be reclassified as non-current liabilities. Dividend payment from capital reserves In the past business year, a total of CHF 2.5 million was paid out to shareholders. The Ypsomed Board of Directors will propose to the General Meeting of Shareholders that a dividend payment of CHF 0.20 per registered share be made from tax-beneficial capital reserves. The General Meeting of Shareholders of Ypsomed Holding AG will take place on Wednesday, June 26, 2013 in Bern. Stable balance sheet permits a strategic approach For many years now, Ypsomed s balance sheet is very stable; its equity ratio is high at 63.6%. At CHF 9.6 million in the 2012/13 business year as against CHF 9.7 million in the previous year, cash and cash equivalents remained virtually constant. Ypsomed s working capital, on the other hand, grew significantly in the 2012/13 business year. Trade receivables increased by CHF 6.7 million from CHF 24.5 million to CHF 31.2 million, while inventories were up by CHF 6.4 million, from CHF 50.1 million to CHF 56.6 million. While fixed assets fell from CHF million to CHF million, intangible 44

64 Ypsomed Financial Report Consolidated income statement (Audited Swiss GAAP FER figures) in thousand CHF Notes 1 April 2012 in % 1 April 2011 in % 31 March March 2012 Sales of goods and services % Cost of goods and services sold % Gross profit % Marketing and sales expenses % Administration expenses % Other operating income % Other operating expenses % Operating profit % Financial income % Financial expenses % Profit before income taxes % Income taxes % Net profit % Earnings per share (basic and diluted) in CHF Operating profit Depreciation of fixed assets Amortization of intangible assets EBITDA (operating profit before depreciation and amortization) % Financial Report 45

65 Ypsomed Financial Report Consolidated balance sheet (Audited Swiss GAAP FER figures) in thousand CHF Assets Notes 31 March 2013 in % 31 March 2012 in % Cash and cash equivalents % Trade receivables 5/ % Other current assets % Prepayments and accrued income % Current income tax assets % Inventories 6/ % Customer machinery % Total current assets % Financial assets % Deferred income tax assets % Fixed assets % Intangible assets % Total non-current assets % Total assets % Liabilities and equity Notes 31 March 2013 in % 31 March 2012 in % Financial liabilities % Current financial liabilities to major shareholder % Trade payables % Prepayments from customers % Current income tax payable % Other payables % Accrued liabilities and deferred income % Provisions % Total current liabilities % Non-current liabilities to major shareholder % Other non-current financial liabilities % Provisions % Deferred income tax liabilities % Total non-current liabilities % Share capital % Capital reserves % Own shares/translation exchange differences % Goodwill acquired offset % Retained earnings % Total equity % Total liabilities and equity %

66 Ypsomed Financial Report Consolidated statement of cash flows (Audited Swiss GAAP FER figures) in thousand CHF Notes 1 April April March March 2012 Net profit Depreciation of fixed and intangible assets Loss from impairment (+) / Reversal of impairment ( ) 9/ Change in provisions (incl. deferred income taxes) Other expenses/income that do no not affect the fund Gain ( )/loss (+) of fixed and financial assets Increase ( )/decrease (+) in trade receivables Increase ( )/decrease (+) in other receivables and prepayments and accr. income Increase ( )/decrease (+) in inventories Increase ( )/decrease (+) in customer machinery Increase (+)/decrease ( ) in trade payables Increase (+)/decrease ( ) in prepayments from customers Increase (+)/decrease ( ) in other short-term payables and accr. liabilities and deferred income Cash flow from operating activities Purchases of financial assets Disposals of financial assets Purchases of fixed assets Disposals of fixed assets Purchases of intangible assets Disposals of intangible assets Final payment acquisition prev. year/acquisitions, net of cash acquired Cash flow from investing activities Financial Report Repayment of financial liabilities to major shareholder Proceeds from borrowings Inflows from capital increase Distribution of capital reserves/par value repayment Purchase of treasury shares Cash flow from financing activities Effect of foreign currency translation Total Cash Flow Cash and cash equivalents as of April Cash and cash equivalents as of March Net increase (+)/decrease ( ) in cash and cash equivalents Costs due to increase of authorized share capital. 47

67 Ypsomed Financial Report Consolidated statement of changes in equity (Audited Swiss GAAP FER figures) in thousand CHF Share capital Group reserves and share premium Treasury shares Cumulative translation reserve Goodwill offset Retained earnings Total Balance as of 1 April Net profit Distribution of dividends from capital contribution reserves Purchases of own shares Translation exchange differences Goodwill due to akquisition offset Balance as of 31 March Balance as of 1 April Net profit Distribution of dividends from capital contribution reserves Translation exchange differences Costs due to increase of authorized share capital Balance as of 31 March

68 Ypsomed Financial Report Basis for the consolidated financial statements 1. General information Ypsomed Holding AG is a limited company (Aktiengesellschaft) established on 29 December 2003 under Swiss law with registered offices in Burgdorf (canton of Berne, Switzerland). Operating in the field of medical technology, the Ypsomed Group is a leading independent manufacturer of injection pens for pharmaceutical and biotech companies, as well as a supplier of pen needles. Ypsomed s core manufacturing business consists of developing and marketing products and services allowing patients to administer their own medication. The Group operates production sites in Burgdorf, Solothurn, Grenchen (all CH) and Tabor (CZ) and has a sales and distribution network across Europe. The shares of Ypsomed Holding AG have been traded on the SIX Swiss Exchange since 2004, and since 2007, on the BX Bern exchange. The company was created as a result of the split-up of the Disetronic group in Disetronic had been founded in 1984 to develop, manufacture and sell infusion pumps and had expanded into the injection systems business in The consolidated financial statements were approved for issue by the Board of Directors on 22 May 2013 and recommended for acceptance to the General Meeting of 26 June Fundamental accounting and assessment methods Basics The consolidated financial statements have been prepared in accordance with the Swiss accounting and reporting recommendations of Swiss GAAP FER according to the principle of true and fair view. They are based on the financial statements of the company prepared for the same reporting period using consistent accounting policies. The Group s reporting currency is the Swiss franc (CHF). The period under review comprises twelve months and ends 31 March. The accompanying consolidated financial statements are published in German and English. The German version is legally binding. All figures included in these financial statements and notes to the financial statements are rounded to the nearest CHF except where otherwise indicated. Consolidation Subsidiaries Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or tradable can also determine whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is obtained. They are de-consolidated from the date that control ceases. Subsidiaries are recognized using the purchase method. The consideration encompasses the compensation transferred in exchange for obtaining control over the identifiable assets, liabilities and contingent liabilities of the company acquired. The compensation encompasses cash payments as well as the fair market value of both the transferred assets, the incurred or assumed liabilities, and in addition the equity instruments as of the trade date that have been issued by the Group. The net assets acquired comprising identifiable assets, liabilities and contingent liabilities are recognized at their fair value. Goodwill is recognized as of the acquisition date and is measured as the excess of the consideration transferred as described over and above the fair value of the identified net assets. If the Group does not acquire 100% of the shares of a company, the minority interest in equity is to be disclosed separately under the equity. Transactions, balances and gains on transactions between subsidiaries are eliminated. Losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Associates Associates are those companies that are significantly influenced but not controlled by the Group. This normally applies to investments in which the Group owns between 20% and 50%. Investments in associates are accounted for using the equity method. The Group s investment in associates includes goodwill identified on acquisition. Ypsomed does not currently have any investments in associates. Foreign currency translation Foreign currency transactions are translated to the functional currency using the exchange rate prevailing at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of comprehensive income as financial income or expenses. In the consolidated financial statement, assets and liabilities of foreign subsidiaries are converted into Swiss francs at year-end exchange rates. Equity is converted with historical exchange rates. The statement of comprehensive income and the statement of cash flows are translated at annual average exchange rates. The effects of this conversion as well as foreign exchange gains and losses arising from the translation of noncurrency congruent financed equity-like corporate loans denominated in foreign currencies are to be recognized in the equity, with no effect on the income statement. Cash Cash and cash equivalents comprise cash on hand, demand deposits and time deposits with a residual term to maturity from the balance sheet date of 90 days at the most. They form the basis of the consolidated statement of cash flows. Trade receivables/other receivables Trade receivables and other receivables are valued at par value less impairment, if any. An allowance is set aside if objective indications show that receivables cannot be collected. Allowances are based on individual valuations. Inventories Raw materials and merchandise purchased are recognized at cost, semifinished and finished goods at their cost of conversion. Discounts are recognized as a reduction in the purchase price. Manufacturing costs include the associated direct production costs and production overheads. If the acquisition or manufacturing costs are higher than the net market value, an impairment loss is recorded on the income statement in the current period to write the inventories down to the net market value (lower of cost or market principle). Net market value is equivalent to the current market price less the usual sales deductions, marketing costs, and administrative costs yet to be incurred. Inventories that cannot be sold are written off in full. The costs of inventories are determined by using the FIFO method. Customer machinery/prepayments from customers Ypsomed receives prepayments from pharma partners in order to acquire production machinery for these pharma partners. Ypsomed coordinates the manufacturing of the machineries with suppliers and makes contractual advance payments to the suppliers. After installation and successful test runs, the machinery is accepted by Ypsomed. From a legal and commercial viewpoint, once the machinery has been accepted by Ypsomed the title is transferred to the pharma partners. The advance and final payments made by Ypsomed to suppliers are disclosed in the consolidated balance sheet as current assets until acceptance of the machinery. The prepayments from customers are recognized in current liabilities. Once the machinery is accepted, the advance and final payments from Ypsomed are settled with the prepayments from the customer. Financial Report 49

69 Ypsomed Financial Report Fixed assets Fixed assets are carried at historical acquisition or manufacturing cost, with depreciation calculated using the straight-line method based on the following estimated useful lives: Buildings 20 to 40 years Technical assets 6 to 20 years Machinery and company facilities 3 to 12 years Fixtures, fittings and vehicles 3 to 8 years Other fixed assets 2 to 10 years Depreciation is included in the following income statement categories: manufacturing costs of goods sold, marketing and distribution costs, administration costs and other operating expenses. Should an asset be impaired as a result of impairment testing, the corresponding impairment charge is included in depreciation and reported separately as an impairment loss. Value-enhancing expenditures are capitalized if the market value or the value in use increases as a result. Long-term leasing contracts, which are, in substance, equivalent to the purchase of assets with long-term financing (financial leasing), are recognized at the beginning of the lease as an asset and measured at net market value/ acquisition cost or, if lower, at the present cost of the leasing payments. The asset is depreciated in line with its useful economic life. Investment properties are reported at cost of acquirement minus depreciation. The period of depreciation is calculated according to the category of asset. Intangible assets Goodwill Net assets taken over in an acquisition are to be valued at actual values, any surplus of acquisition cost over the newly valued net assets is to be designated as goodwill (purchase price allocation). The goodwill is to be offset at the date of acquisition. The effects of a theoretical capitalization are to be disclosed in the notes. Development costs Development costs are capitalized if an intangible asset can be identified, finished, marketed, or used internally, if it is controlled by the Ypsomed Group, if it is expected to provide the Ypsomed Group with an economic benefit over several years, and if its costs can be reliably determined. Capitalized development costs are amortized straight-line over their useful economic lives after beginning of marketing. The amortization is included in the manufacturing costs of products and services sold. Costs accrued for development projects are tested for impairment on an annual basis. Other intangible assets Patents are carried at acquisition cost and amortized over their estimated useful lives of 15 to 20 years. Amortization is included in the costs of research and development that are integrated in the manufacturing costs of products and services sold. Software is capitalized on the basis of the costs incurred to acquire the software and bring the software to use. These costs are amortized over the estimated useful life of three to four years using the straight-line method. Amortization is mainly included in administration expenses. Intangible assets, such as brand names or customer relationships that were acquired through a business combination and can be identified separately, are reported if they fulfill the definition of an intangible asset. The acquisition costs of such intangible assets correspond to their fair value at the time of acquisition. The value thereafter is measured at acquisition cost minus accumulated amortization and depreciation. The useful life is estimated at five to eight years. Amortization is included in marketing and distribution costs. Financial assets Financial assets are recognized at acquisition cost less impairment, if any. Impairment is recorded in profit or loss for the current period. Impairment of assets All assets are reviewed as of each balance sheet date for indications of impairment. If there are indications that an asset may be impaired, the recoverable amount of the asset is determined and the impairment loss is estimated. Should the estimated recoverable amount of the asset, which is equivalent to the higher of net market value and the useful value of the asset, be lower than the asset s book value, an adjustment is made to the income statement to reduce the book value of the asset to the estimated recoverable amount in the same period in which the impairment was discovered. Net market value is the price obtainable between independent third parties less the associated selling expenses. Useful value is based on the estimated future cash flows resulting from the use of the asset, including any possible cash flow at the end of the useful life, discounted using an appropriate long-term interest rate. Long-term financial liabilities to shareholders The loan to the major shareholder is measured at its nominal amount. Provisions Provisions are established when a legal or de facto obligation arising from previous events exists that will likely result in a cash outflow and this cash outflow can be reliably estimated. The provisions established represent the best possible estimate of the final obligation. Long-term provisions are discounted to their present values, provided that the impact is material. The subdivision into short-term and long-term provisions is based on whether utilization is assumed to be probable within one year or at a later time. Possible obligations whose existence requires confirmation by future events, or obligations whose amount cannot be reliably estimated, are disclosed in the notes to the financial statements as contingent liabilities. Pension benefit obligations The pension benefit obligations of the Group companies in respect of old age, death and disability comply with the statutory provisions and regulations in the respective countries. The employees of the Swiss companies have a legally independent pension fund for retirement, death and disability. The pension funds are financed by employer and employee contributions (defined contribution plan). The actual economic impact of pension plans on the company is calculated as of the balance sheet date. An economic benefit is capitalized provided it will be available to reduce the company s future pension expenses. An economic obligation is recognized as a liability if the conditions for establishing a provision are met. Any unconditionally available employer contribution reserves are recognized as assets. The economic impacts of surpluses or deficits in the pension funds on the Group, as well as a change in any employer contribution reserves, are recognized as profit or loss and reported as personnel expenses in addition to the contributions deferred to the reporting period. Current income taxes Income taxes are calculated based on reported profits and in conformity with the tax laws prevailing in the individual countries and recognized in profit or loss of the current period. Deferred taxes are taken into account on temporary differences between tax bases and the carrying amounts in the consolidated financial statements and are calculated using the liability method based on effective or expected effective local tax rates. Deferred tax assets are recognized for loss carry-forwards where it is highly probable that they can be offset against future taxable income. The changes in deferred tax assets and liabilities are recognized in the consolidated income statement. Taxes on transactions that are reported in equity are also recognized in equity. Net sales and sales recognition Net sales Sales consists of all sales proceeds attained from the delivery of goods and provision of services to third parties after deducting discounts, rebates, cash discounts and value-added taxes. Sales proceeds are always included in the income statement as soon as the delivery of the goods has taken place and benefit and risk have been transferred to the buyer, or the service has been rendered. Net sales also comprises income from the provision of research, development, industrialization and marketing services. Other operating income Other operating income primarily includes rental income arising from the 50

70 Ypsomed Financial Report leasing of properties owned by the Ypsomed Group, licensing income arising from the use of Ypsomed assets by external third parties, and proceeds from the disposal of property, plant, and equipment. Long-term contracts Development and industrialization projects are accounted for according to the percentage-of-completion method (PoCM). Services and costs are correspondingly considered according to the degree of completion (cost-to-cost method) so that any profit is taken into consideration proportionally. The degree of completion for the services provided is calculated by determining the difference between the costs incurred and the costs expected for the whole order. Long-term contracts are accounted for under inventories, customer machinery and prepayments from customers. Research and development costs Research costs are routinely included in the manufacturing costs of the products and services sold. Development costs are capitalized if an intangible asset can be identified, finished, marketed, or used internally, if it is controlled by the Ypsomed Group, if it is expected to provide the Ypsomed Group with an economic benefit over several years, and if its costs can be reliably determined. Capitalized development costs are amortized straight-line over their useful economic lives. The amortization is included in the manufacturing costs of products and services sold. Costs accrued for development projects are tested for impairment on an annual basis. Borrowing costs Borrowing costs in connection with the construction of property, plant, and equipment are capitalized under certain conditions. All other borrowing costs are charged directly to the income statement. 3. Risk assessment The management of the Ypsomed Group carries out a comprehensive risk assessment at least once a year. This standardized process is based on a risk inventory that encompasses the relevant risk categories such as strategic risks, management risks, general risks in operating business, legal risks, systemic risks, financial risks (including market, credit and liquidity risks) and event risks (including political, regulatory, fiscal and external risks). The fundamental risks are assessed with regard to probability of occurrence and impact, and both management and the Board of Directors decide on measures to be taken and monitor their implementation according to predetermined criteria. The risk of patent infringement or product liability claims by a third party, risks in connection with the recall of products and negative developments in the reimbursement of costs of Ypsomed products through stateprescribed cost-saving measures in the area of healthcare or by health insurance schemes as well as problems with authorization and upholding of authorization of drugs used together with Ypsomed products can also result in lasting detrimental effects, not only on the business performance of the Ypsomed Group but also on its financial situation and competitive position in the marketplace. 5. Key estimates and assumptions The preparation of the consolidated financial statements in accordance with generally accepted accounting principles assumes that management makes certain estimates and assumptions which have an impact on the reported carrying amounts of assets and liabilities shown in the balance sheet on the balance sheet date and income and expenses accounted for in the period under review. These estimates and assumptions are based on future expectations and are held reasonable at the time of preparation of the financial statements. The actual amounts can deviate from these assumptions. The most important influential factors on positions based on estimates and assumptions are expressed as follows: Capitalized development expenses The development expenses are capitalized when the requirements for the capitalization are met. Ypsomed s estimation of future economic benefits is based on management s assumptions with regard to the economic baseline conditions, expected prospective cash flows, the discount rates to be applied and the expected period of time in which economic benefits are targeted. Capitalized development expenses amount to CHF 51.5 million as of 31 March 2013 (prior year CHF 45.3 million). Provisions for warranties When determining the provisions for warranties, management takes into account currently marketed own products and sets the provisions necessary to cover all callable claims based on the maturity and characteristics of the products as well as experience. Provisions for warranties as of 31 March 2013 amount to CHF 0.8 million (prior year CHF 1.6 million). Income taxes When accruals for income taxes are made for a period, uncertainties regarding final tax payments remain. Estimates that vary from the definitive tax amount have an impact on current and deferred income taxes. In particular, with the capitalization of deferred tax assets from losses carried forward, the value of these tax loss carry-forwards and the tax rates to be applied must be estimated. Deferred income tax assets related to tax loss carry-forwards as of 31 March 2013 amount to CHF 6.0 million (prior year CHF 4.7 million). Financial Report 4. Legal risks The Ypsomed Group develops, manufactures and sells innovative medical technical devices, based on technical expertise and technologies protected by intellectual property rights. The Group is either owner of the required rights or license holder of the property rights of a third party. In the medical devices market, disputes over patent rights and patent infringements occur fairly frequently and can involve costly and time-intensive patent infringement suits. The development, manufacture and sale of medtech products involve product liability risks and can lead to product recall. There is no guarantee that the present liability insurance is sufficient to cover all damage cases connected with the development, manufacture and sale of medical products and that the insurance companies will still be prepared in future to insure Ypsomed Group business activities against liability risks at viable conditions. 51

71 Ypsomed Financial Report Notes to the consolidated financial statements In thousand CHF, unless otherwise stated Events ocurring after the balance sheet date On April 24, 2013, Ypsomed announced plans to sell the company Dia- Expert GmbH Deutschland. Depending on the potential buyer or buyers, various different product groups may be acquired or the company may be split up. It is actual therefore impossible to make any statements on the profit and sales that will be lost in future as a result of this divestment. A gain of divestment is being expected. 1. Acquisitions In the business year 2012/13 none acquisition was done. On 2 November 2011, Ypsomed AG, Burgdorf acquired the assets of the infusion-set-business Orbit of the american company ICU Medical Inc. Assets Book value after acquisition 2012/13 Book value after acquisition 2011/12 Cash and cash equivalents Trade receivables Inventories Fixed assets 106 Intangible assets 660 Other assets Total assets Liabilities Trade payables Other liabilities Total liabilities 0 0 Net working capital Goodwill acquired offset Total purchase consideration Cash and cash equivalents acquired Deferred purchase consideration Offsetting of receivables Net cash outflow The inventories were acquired during the current business year. At the time of acquisition, they were worth CHF 1.6 million. 52

72 Ypsomed Financial Report 2. Consolidation scope Interest held Capital / Votes Share capital Research & Development Production Marketing and Sales Financing and Services Ypsomed Holding AG, CH-Burgdorf CHF Ypsomed AG, CH-Burgdorf 100 % CHF Ypsomed Distribution AG, CH-Burgdorf 100 % CHF TecPharma Licensing AG, CH-Burgdorf 100 % CHF Ypsotec AG, CH-Grenchen 100 % CHF Ypsotec s.r.o., CZ-Tábor 100 % CZK Ypsomed GmbH, DE-Liederbach 100 % EUR DiaExpert GmbH, DE-Liederbach 100 % EUR Feelfree GmbH, DE-Liederbach 100 % EUR Ypsomed AB, SE-Bromma 100 % SEK Ypsomed S.A.S., FR-Paris 100 % EUR Ypsomed BV, NL-Vianen 100 % EUR Ypsomed India Private Ltd., IN-Gurgaon 100 % INR Ypsomed Limited, GB-Selby 100 % GBP Ypsomed GmbH, A-Wien 100 % EUR Foreign currencies Balance sheet year-end rates Income statement average rates 31 March March / /12 Euro (EUR) US-Dollar (USD) Swedish krona (100 SEK) Norwegian krone (100 NOK) Danish krone (100 DKK) Czech koruna (100 CZK) Indian rupee (100 INR) British pound (GBP) Financial Report 4. Cash and cash equivalents 31 March March 2012 Cash Postal accounts Bank accounts Total

73 Ypsomed Financial Report 5. Trade receivables 31 March March 2012 Trade receivables Provision for bad and doubtful debts Total Provision for bad and doubtful debts 2012/ /12 At 1 April Addition Use Reversal Currency translation differences 3 8 At 31 March Inventories 31 March March 2012 Raw materials and supplies Goods in process Finished products Gross inventories Valuation allowance Total Financial assets 31 March March 2012 Bionime Corp. Taiwan and Insulet Corp. USA Other financial assets Total

74 Ypsomed Financial Report 8. Fixed assets Cost Land and buildings Machinery and equipment Other fixed assets Assets under construction Buildings for investment purposes At 1 April Additions Disposals Changes in consolidation scope Transfers Currency translation differences At 31 March Total Accumulated depreciation At 1 April Depreciation Disposals Transfers Currency translation differences At 31 March Net book value at 1 April Net book value at 31 March Cost At 1 April Additions Disposals Transfers Currency translation differences At 31 March Financial Report Accumulated depreciation At 1 April Depreciation Disposals Transfers Currency translation differences At 31 March Net book value at 1 April Net book value at 31 March There are no fixed assets pledged to secure loans and there are no longterm leasing agreements (financial leasing). The fire insurance value of fixed assets at March 31, 2013, amounted to CHF million (previous year: CHF million). Gains from the sale of fixed assets in the 2012/13 business year amounted to CHF 0.1 million (previous year: CHF 0.2 million). Gains from the sale of fixed assets are included in the income statement under other operating income. 55

75 Ypsomed Financial Report 9. Intangible assets Cost Development costs Patents Software Client base Total At 1 April Additions Disposals Change in consolidation scope Transfers Currency translation differences At 31 March Accumulated amortization At 1 April Amortization Impairment Disposals Transfers 6 6 Currency translation differences At 31 March Net book value at 1 April Net book value at 31 March Cost At 1 April Additions Disposals Transfers Currency translation differences At 31 March Accumulated amortization At 1 April Amortization Impairment Disposals Currency translation differences At 31 March Net book value at 1 April Net book value at 31 March CHF 0.3 million was impaired due to a change of concept in a development project. Development costs capitalized include CHF 27.1 million (prior year CHF 23.3 million) for products in the development phase, CHF 5.1 million (prior year CHF 0.1 million) for products in the industrialization phase, CHF 0.0 million (prior year CHF 0.0 million) for products in the pre-launch phase and CHF 19.2 million (prior year CHF 21.8 million) for products in the phase of commercialization. 56

76 Ypsomed Financial Report 10. Goodwill not reported in the balance sheet Acquired goodwill the difference between acquisition costs and the recalculated current value of all net assets acquired is offset directly against equity at the time of acquisition of a participation or business. Theoretical capitalization of goodwill and amortization over five years would produce the following stated values under assets and scheduled amortization of goodwill in the income statement: Cost 2012/ /12 At 1 April Additions before taxes Accumulated currency translation differences At 31 March Accumulated amortization At 1 April Amortization, scheduled amortization over 5 years Change in accumulated currency translation differences At 31 March Net book value at 1 April Net book value at 31 March Net profit and equity would change as follows: Net profit Scheduled amortization over 5 years Tax effects Net profit/net loss on reporting goodwill Financial Report Equity at 31 March Equity at 31 March Effect of reporting goodwill in the balance sheet FX effects on goodwill Equity on reporting goodwill at 31 March

77 Ypsomed Financial Report 11. Financial liabilities to major shareholder 31 March March 2012 Loan from Techpharma Management AG, Burgdorf Current Non-Current Since April 1, 2010 the interest is based on CHF 12-month LIBOR rate as published by the Swiss National Bank plus a margin of 0.5 % with semiannual interest rate fixing. At any time Ypsomed Holding AG is eligible to amortize the loan in full or partially. Techpharma Management AG for its part may call for an amortization of CHF 5.0 million per annum by applying a term of notice of 3 months. In the 2013/14 business year, Techpharma Management AG will waive repayment of CHF 5.0 million. Techpharma Management AG is controlled by Willy Michel. In the 2012/13 business year, interest amounting to CHF 0.2 million (prior year CHF 0.2 million) was paid on the loan. 12. Provisions Warranties Restructuring Other Total At 1 April Additions Release Utilization At 31 March of which current At 1 April Additions Release Utilization Currency translation differences At 31 March of which current Warranties There is a risk that medical products developed, distributed and produced by Ypsomed could have material defects or product faults, resulting in legal liability and product liability in particular, as well as other liabilities, such as the withdrawal or recall of products. Provisions are recorded based on management`s best estimate and relate to guarantees and also to replacement costs for withdrawn products. The company s management bases these provisions on the estimated potential guarantee claim for each product. Ypsomed holds insurance policies with third parties to cover material damages, interruption of operation, product liability and other risks, with worldwide cover. Ypsomed believes that its insurance cover and provisions with regard to business activities and the associated operative risks involved with this are appropriate and sensible. However, events can arise that are not covered, or only partly covered by insurance policies or provisions made by Ypsomed. The closing of an insurance contract, covering product liability, depends on the development of the insurance market, in particular on the general development of the pharmaceutical industry, in which high claims for compensation are typical. Although no such losses are presently expected at Ypsomed, there is no guarantee that the company might not be subjected to damage claims in the future that are in excess of the cover available. Provisions for warranties cover any guarantee claims that may occur for products on the market. The provisions extend for the average life of the products, which is between 1 and 4 years, depending on the product, and are also determined by the best possible assessment of the risk of a claim for each product category. Other provisions Other provisions are based on estimates and have the purpose of complying with requirements for disposal of waste related to the upcoming conversions of buildings. 58

78 Ypsomed Financial Report 13. Share capital Share capital (in thousand CHF) 2012/ /12 At 1 April At 31 March Shares issued as at 31 March Treasury shares as at 31 March Shares outstanding as at 1 April Purchases Average price in CHF 0 55 Shares outstanding as at 31 March Ypsomed Holding AG was founded on 29 December 2003 with original share capital of CHF , consisting of shares with a nominal value of CHF 100 each. There exist a total of shares, each with a par value of CHF The General Meeting of Shareholders resolved on 24 June 2009 an increase of the par value of CHF 5.25 to CHF As a result the share capital has increased in the amount of CHF 59.0 million by debiting the group reserves. Within the scope of the capital increase that took place in June 2009 the share capital was increased in the amount of CHF 21.1 million. As of September 30, 2010, the par value was reduced by CHF 0.25 to CHF and repaid to the shareholders. The total reduction of the par value was CHF 3.2 million. As of March 31, 2013, the Ypsomed Group and the employee pension fund held treasury shares in total (previous year: ). Conditional share capital (in thousand CHF) 2012/ /12 At 1 April At 31 March Financial Report The company has a conditional share capital totaling CHF 2.3 million (prior year CHF 2.3 million). The company may issue a maximum of fully paid up registered shares of nominal value CHF (prior year CHF 14.15) each to selected employees and members of the Board of Directors. Authorized share capital (in thousand CHF) 2012/ /12 At 1 April 0 0 At 31 March Until June 26, 2014, the Board of Directors is authorized at any time to increase the share capital by CHF by issuing a maximum of fully paid up registered shares with a nominal value of CHF each. Several increases in smaller amounts are permitted. The Board of Directors is authorized to restrict or withdraw shareholders subscription rights and assign them to third parties (1) for the acquisition or partial acquisition of companies, parts of companies or participating interests, (2) for the financing or refinancing of the acquisition of companies, parts of companies or participating interests, or (3) for the expansion of international distribution structures. Shares for which subscription rights have been granted but not exercised are to be allocated by the Board of Directors in the interests of the company. The Board of Directors shall determine the time and amount of each issue, the point in time at which an entitlement to a dividend accrues, the nature of contributions and, if relevant, the nature of contributions in kind or the takeover of tangible assets. In this regard, the Board of Directors may issue new shares by means of firm underwriting by a bank or third party followed by an offer made to existing shareholders. The subscription to and purchase of the new shares and any subsequent transfer of the shares is limited by the provisions of the Articles of Association. The Board of Directors made no use of its authorization during the reporting year. 59

79 Ypsomed Financial Report 14. Long-term contracts 2012/ /12 Revenue from development and industrialization services Long-term contracts in the balance sheet 31 March March 2012 Trade receivables Inventories 17 0 Prepayments from customers Personnel expenses 2012/13 % 2011/12 % Wages and salaries Social security expenses Other personnel expenses Total Personnel at 31 March (full-time equivalents) 31 March March 2012 Switzerland Germany Netherlands 7 6 France Scandinavia 3 3 Czech Republic United Kingdom 12 7 Austria 2 1 India 9 6 Total Headcount

80 Ypsomed Financial Report 16. Employee pensions Within the Group, there are various employee pension plans, of which most employees are members. For the companies abroad and one company in Switzerland, there are pension plans for which the obligation to provide benefits such as retirement, death or invalidity benefits lies with a state institution and/or an insurance company. For the pension plan for two companies in Switzerland representing a proportion of 75% of the Group s workforce as at March 31, 2013, there is a separate pension scheme set up in accordance with the Swiss Federal Act on Occupational Retirement, Survivors and Disability Pension Plans (BVG) and independent of the Group. In the year under review, the actuarial surplus for this pension scheme amounted to CHF 16.0 million (previous year: CHF 10.0 million). This corresponds to a calculated level of cover within the meaning of Art. 444 of the Ordinance on Occupational Retirement, Survivors and Disability Pension Plans (BVV2) of 117.1% based on a technical interest rate of 2.75% and BVG 2010 (previous year: 111.4%, technical interest rate 2.75% and BVG 2010). As it was possible to set aside value fluctuation reserves above the target value of 15% of assets, the pension scheme has freely disposable resources of CHF 2.0 million. As these resources were generated only recently and the financial markets are very volatile at present, the decision was made not to reduce employer contributions. These freely disposable resources thus do not represent an economic benefit within the meaning of Swiss GAAP FER 16 and were therefore not capitalized. Pension costs as part of personnel expense correspond to the standard contribution payments by the Group companies involved. Surplus/Deficit Economical benefit/ Economic obligation Contributions concerning the business period Pension benefit expenses within personnel expenses 31 March March March / / /12 Pension institutions with surplus Per end of the business years 2011/12 and 2012/13 there were no employer contribution reserves existing. 17. Financial income 2012/ /12 Interest income Gains from marketable securities Foreign exchange gains Other financial income Total Financial Report The gains from marketable securities in previous year resulted from sales of financial assets. 18. Financial expenses 2012/ /12 Interest expenses Losses from marketable securities Impairment Foreign exchange losses Other financial expenses Total The impairment results from decrease of market value of a financial asset. 61

81 Ypsomed Financial Report 19. Income taxes 2012/ /12 Current income taxes Deferred income taxes Total Average tax rate in % 46.6% 12.7% The Group benefits from reduced tax rates for individual companies. These rates are subject to annual changes. Changes to these tax rates and differences in the allocation of profits to these companies affect the effective tax rate. The higher tax rate compared with the previous year is mainly the result of back taxes of CHF 0.6 million charged to a subsidiary. Gains on the sale of investments (CHF 5.1 million) were also taxed on a privileged basis in the previous year. 31 March March 2012 Capitalized deferred tax assets of which temporary differences of which not yet utilized tax-loss carryforwards Tax-loss carryforwards are only recognized if it is probable that the associated tax benefits can be realized. 20. Segment information For the purposes of company management, the Ypsomed Group is organized into business sectors according to products and services. The segment Delivery Devices comprises the product groups pen systems, pen neeedles, infusion sets and other injection moldings produced by Ypsomed. The business segment Diabetes Direct Business covers the direct trade in a range of diabetes articles. Others contains the business segment precison turned parts» and currently unused real estate for operational purposes. Intersegmental sales are executed at arm s length. Business year 2011/12 Delivery Devices Diabetes Direct Business Others Eliminations Group Sales of goods and services to third party customers Intersegmental sales Total sales of goods and services Operating profit Investments in fixed and intangible assets Depreciation/Amortization/Impairment Business year 2012/13 Delivery Devices Diabetes Direct Business Others Eliminations Group Sales of goods and services to third party customers Intersegmental sales Total sales of goods and services Operating profit Investments in fixed and intangible assets Depreciation/Amortization/Impairment

82 Ypsomed Financial Report Sales of goods and services are reported by geographical location Sales of goods and services 2012/ /12 Switzerland Europe North America Rest of the World Total Sales of goods and services are reported by geographical location in accordance with the invoice address. The sales of injection systems to biotech and pharmaceutical partners are made mainly to their European group companies. These companies market the products worldwide. 21. Contingent liabilities The Group has contingent liabilities of kchf 698 (prior year kchf 699) toward third parties arising in the ordinary course of business. Ypsomed does not anticipate that any material liabilities will arise from the contingent liabilities. 22. Contractual obligations 31 March March 2012 Contractual purchase commitments for products Contractual obligations from rental contract with Techpharma Management AG until Contractual obligations from rental contract with GBUK Healthcare until Contractual obligations from rental contract with Exel Medical GmbH until Contractual obligations from contract for work and services to build a factory and office building for Ypsotec CZ by Total contractual obligations Financial Report The rental contract between Ypsomed AG and Techpharma Management AG, a company controlled by Willy Michel, was signed at arm s length. Rental interest is based on an independent rental value estimate and was per 1 January 2012 reduced from CHF to CHF annually plus VAT. It is linked to the consumer price index. The rental contract arranges for small and normal maintenance work on the building to be paid by the tenant up to a maximum amount of 2% of the annual rent per calendar year. As at 31 March 2013 contractual obligations for the purchase of fixed assets amount to CHF 9.0 million (prior year CHF 6,7 million), and for the purchase of intangible assets these amount to CHF 0.4 million (prior year CHF 0.05 million). 63

83 Ypsomed Financial Report 23. Transactions with related parties Related Group parties are Techpharma Management AG, Adval Tech Group, Finox AG and employee pension funds. Services are remunerated in line with industry standards. Receivables from related parties amounted to kchf 684 (prior year kchf 527) on the balance sheet date. Liabilities amounted to kchf 97 (prior year kchf 0). In the year under review the following transactions were made with related parties: 2012/ /12 Techpharma Management AG (interest according to note 11) Techpharma Management AG (compensation for rented business premises) Techpharma Management AG (amounts in accordance with service contract) Adval Tech Group Adval Tech Group Finox AG Finox AG Total Willy Michel (respectively his company Techpharma Management AG) has been renting out the building on Buchmattstrasse in Burgdorf (Ypsomed Nord) to Ypsomed since 1 January The parties signed a rental contract set at an indexed market rent, based on a rental assessment performed by an independent party (see figure 22). The rental contract can be terminated for the first time on 31 December 2015, conditional upon 24 months notice. The tenant has unlimited first right of refusal for purchasing the property for the entire rental period, but for a maximum of 25 years from the start of the rental. Willy Michel (respectively his company Techpharma Management AG) and Ypsomed have concluded a framework service contract that can be terminated by either side at any time. This contract allows for Techpharma Management AG to provide occasional services to the Ypsomed Group (e. g. hotel, catering and transport services) as well as selected management support services (including temporary personnel leasing) and, for its part, for the Ypsomed Group to offer occasional services to Techpharma Management AG (e. g. management and IT support, including temporary personnel leasing). The services are invoiced at normal market conditions. The mutual supply of temporary personnel is invoiced at the personnel cost rate. This contract was discussed and approved by the Board of Directors, in whose opinion this is a cooperation agreement at normal market conditions. The framework service contract has been expanded inasmuch as Willy Michel has been performing the function of CEO since August The amount of remuneration hitherto for the management services provided personally to the company by Willy Michel was for this reason not adjusted. In June 2007, Ypsomed AG and Adval Tech Holding AG signed an agreement on strategic cooperation in tool construction with a fixed contract term of 5 years. In addition, a subcontracting agreement was concluded in May 2012 with Adval Tech, under which Adval Tech will manufacture infusion sets for insulin pumps as a subcontractor for Ypsomed. The services purchased are in line with normal market conditions. A cooperation contract existed between Ypsomed Holding AG and two of its subsidiaries on the one hand, and Techpharma Management AG (which is controlled by Willy Michel) and its subsidiary Finox AG on the other hand. This contract was terminated on 20 December 2011, and replaced by a licensing agreement. Finox AG primarily develops pharmaceuticals, in particular fertility hormones as well as devices for their administration. The licensing agreement regulates the rights to the technology and the industrial property rights developed under the cooperation contract with regard to the administration devices. Ypsomed AG is granted a license for the use of two administering technologies outside of the specified areas of application. Finox AG may use the industrial property rights developed under the cooperation contract on an exclusive basis within specified areas of application. Under the licensing agreement, Finox AG can continue to use consultancy services provided by Ypsomed employees at hourly and daily rates that are in accordance with the prevailing market rates. Finally, the termination of the cooperation contract means that the former first right of refusal of Ypsomed AG to purchase the shares of Finox AG now no longer applies. The termination of the cooperation contract and the conclusion of the new licensing agreement were discussed and approved by the Board of Directors and, in the opinion of the Board, represent a cooperative relationship that is usual in the market. 24. Earnings per share Earnings per share are calculated by dividing net profit through the weighted monthly number of shares outstanding during the period. The average number of treasury shares is deducted from the number of shares issued. 2012/ /12 Net profit in thousand CHF Number of outstanding shares weighted on a monthly basis Earnings per share in CHF (basic and diluted) Proposal for the appropriation of retained earnings The Board of Directors proposes to the General Meeting of Shareholders on 26 June 2013 a tax-free distribution of capital reserves in the amount of CHF 0.20 per share (prior year CHF 0.20 per share). The total distribution based on the actual share capital as per 31 March 2013 will be approximately CHF 2.5 million (prior year CHF 2.5 million). This amount will be credited to shareholders. 26. Remuneration statement and significant shareholders See notes to the financial statement 2012/13 of Ypsomed Holding AG from page

84 Ypsomed Financial Report Report of the group auditors Financial Report 65

85 Ypsomed Financial Report 66

86 Ypsomed Financial Report Balance sheet of Ypsomed Holding AG statutory financial statements In thousand CHF Assets 31 March March 2012 Cash and cash equivalents Marketable securities Accrued income and prepaid expenses Other receivables Total current assets Loans to Group companies Investments Expenditures related to capital increase Total non-current assets Total assets Liabilities and equity 31 March March 2012 Trade payables Accrued expenses and deferred income Current financial liabilities to major shareholder Bank loans Current income taxes payable Total current liabilities Non-current financial liabilities to major shareholder Total non-current liabilities Financial Report Share capital Capital contribution reserves Disagio Legal reserves Reserves for own shares Retained earnings Net profit Total equity Total liabilities and equity

87 Ypsomed Financial Report Income statement of Ypsomed Holding AG statutory financial statements In thousand CHF Income 1 April March April March 2012 Financial income Total income Expenses Depreciation and amortization Financial expenses Administration Income tax expenses Total expenses Net profit Proposal for the appropriation of retained earnings The Board of Directors proposes to the General Meeting of Shareholder that the retained earnings be appropriated as follows: In thousand CHF 31 March March 2012 Retained earnings Increase reserve for own shares Net profit for business year Non-approved capital contribution reserves from the Swiss Federal Tax Administration Retained earnings at disposal of the General Meeting Allotment from capital contribution reserves Distribution of dividend from capital contribution reserves Carried forward to the next year In the 2011/12 reporting year, the Swiss Federal Tax Administration (FTA) did not approve this amount as capital contribution reserves and it was reclassified as retained earnings. 2 The Board of Directors proposes to the General Meeting of Shareholders a tax free distribution of capital contribution reserves in the amount of CHF 0.20 per share. The total distribution based on the actual share capital as per 31 March 2013 will be approximately CHF 2.5 million (prior year CHF 2.5 million). This amount will be credited to shareholders. 68

88 Ypsomed Financial Report Notes to the financial statements 2012/13 of Ypsomed Holding AG Income Financial income mainly consists of dividends, interest income and gains on securities. Share capital The share capital of CHF (prior year CHF ) consists of (prior year ) registered shares with a nominal value of CHF (prior year CHF 14.15). Conditional share capital The company has a conditional share capital totalling CHF 2.3 million (prior year CHF 2.3 million). The company may issue a maximum of (prior year ) fully paid-up registered shares with a nominal value of CHF (prior year CHF 14.15) each to selected employees and members of the Board of the Directors. Authorized share capital At the General Meeting of Shareholders on June 27, 2012, the Board of Directors was authorized to increase the share capital by CHF by issuing a maximum of fully paid-up shares with a nominal value of CHF at any time between then and June 26, This may be done in several stages. Significant shareholders and shareholder groups 31 March March 2012 Number of shares Capital and vote share Number of shares Capital and vote share Shareholder group Michel family % % Patinex AG % % Investments 31 March March 2012 Interest held Book value (CHF) Interest held Book value (CHF) Ypsomed AG, CH-Burgdorf 100 % CHF % CHF Share capital CHF Ypsotec AG, CH-Grenchen 100 % CHF % CHF Share capital CHF Techpharma Licensing AG, CH-Burgdorf 100 % CHF % CHF Share capital CHF Ypsomed Distribution AG, CH-Burgdorf 100 % CHF % CHF Share capital CHF Bionime Corporation, Taiwan 10.2 % TWD % TWD Financial Report Share capital TWD (Prior year TWD ) Insulet Corporation, Bedford, MA, U.S.A. 0.0 % USD % USD Share capital USD Total Investments Own shares 31 March March 2012 Number of shares Ø price Number of shares Ø price Purchase of own shares Disposal of own shares 0 0 Own shares held

89 Ypsomed Financial Report Claim subject to subordination clause against subsidiaries 31 March March 2012 Loan to Ypsomed Distribution AG, CH-Burgdorf In addition there is letter of comfort with unlimited amount in favor of a group company. Securities, reserve for guarantees and collateral order in favor of third parties 31 March March 2012 Credit Suisse, CH-Zurich Guarantee in the context of credit business for Ypsomed AG Risk assessment Ypsomed Holding AG performs an extensive risk assessment at least once a year. This standardized process is based on an inventory of risks, which covers the relevant categories of risks such as strategic risks, management risks, general risks of the business areas, legal risks, systemic risks, financial risks including market-, credit- and liquidity risks and event risks including political, regulatory, fiscal and external risks. The significant risks are valuated regarding the probability of occurrence and impact, and both Management and the Board of Directors determine measures and monitor the implementation according to established criteria. Board of Directors remuneration (Gross, in thousand CHF, exclusive of VAT) Board of Directors remuneration Willy Michel (Chairman) Anton Kräuliger (Vice-Chairman) Prof. em. Dr. Norbert Thom (Member) Gerhart Isler (Member) Total 12/13 11/12 12/13 11/12 12/13 11/12 12/13 11/12 12/13 11/12 Fixed amount Variable amount Attendance fee / Others Total remuneration and attendance fee Techpharma Management AG: for consultancy services Dr. h. c. Willy Michel Total remuneration Board of Directors Highest remuneration to Willy Michel Further transactions to affiliated persons of Willy Michel Techpharma Management AG: for loan (interest) Techpharma Management AG: for rented business premises (rent)

90 Ypsomed Financial Report Management remuneration (Gross, in thousand CHF) Highest remuneration to: Basic Salary Variable Salary Payments Employer contributions to Social Insurance Total Richard Fritschi, CEO until August /13 11/12 12/13 11/12 12/13 11/12 12/13 11/12 12/13 11/ Dr. Beat Maurer, Senior Vice Präsident Legal Services & Intellectual Property Add. members of management Total management remuneration As of 31 March members of the non-executive and executive boards held the following shares. No Ypsomed share options were held. Share ownership of Board of Directors Shares as of 31 March 2013 Shares as of 31 March 2012 Willy Michel, Chairman Techpharma Management AG as related party to Willy Michel, Chairman Total of Willy Michel and Techpharma Management AG combined Gerhart Isler, Member Anton Kräuliger, Vice-Chairman Prof. em. Dr. Norbert Thom, Member 0 0 Total Financial Report Share ownership of Management Willy Michel, CEO since August Techpharma Management AG as related party to Willy Michel Simon Michel, Senior Vice President Marketing & Sales Dr. Beat Maurer, Senior Vice President Legal Services & Intellectual Property Yvonne Müller, Senior Vice President Human Resources Niklaus Ramseier, Senior Vice President Finance/IT (CFO) Hans-Ulrich Lehmann, Senior Vice President Technology Dr. Benjamin Reinmann, Senior Vice President Operations Total For details of the Michel family shareholder group and their shares kept, see also Corporate Governance, page 80. For further details of shareholdings, see also Corporate Governance, page

91 Ypsomed Financial Report Report of the statutory auditors 72

92 Ypsomed Financial Report Financial Report 73

93 Ypsomed Financial Report Five-year overview 1 April 31 March Swiss GAAP FER IFRS In thousand CHF 2012/ / / / /09 Sales of goods and services 1 /Total Sales Gross profit Gross profit in % 23.3 % 22.7 % 23.3 % 26.2 % 30.7 % Operating profit Operating profit in % 2.0 % 2.1 % 3.4 % 5.3 % 11.2 % Net profit Net profit in % 0.7 % 3.4 % 2.1 % 3.7 % 9.6 % Depreciation of fixed assets Amortization of intangible assets EBITDA EBITDA in % 12.5% 13.2 % 12.9 % 16.1 % 20.8 % Current assets Non-current assets Current liabilities Non-current liabilities Balance sheet total Capital expenditure Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Issued shares as of 31 March Average shares outstanding Earnings per share in CHF (basic / diluted) Dividend per share (in CHF) Par value repayment per share (in CHF) Book value per issued share (in CHF) Share price: year s highest (in CHF) Share price: year s lowest (in CHF) Share price: year-end (in CHF) Market capitalization (in million CHF) Average headcount Average fulltime equivalent Year-end headcount Year-end fulltime equivalent Sales per average fulltime equivalent (in CHF) See basis for the consolidated financial statements on page Since 1 April 2008, Real Estate income has been included in Total Sales (IFRS). 3 Operating profit before depreciation and amortization. 4 The Goodwill was offset with equity under Swiss GAAP FER. 74

94 Ypsomed Corporate Governance Report Corporate Governance This Corporate Governance report describes the management and control principles at the highest corporate level of Ypsomed Holding AG and its subsidiaries according to the directive of the SIX Swiss Exchange concerning information on corporate governance. Ypsomed, which is headquartered in Burgdorf, Switzerland, is a world leader in the field of injection systems for the selfadministering of pharmaceutical substances. Ypsomed develops and produces its products primarily in Switzerland. Ypsomed injection systems are largely marketed by biotech and pharmaceutical partners around the world. As part of its diabetes care business segment, Ypsomed focuses on selfmedication products for patients with diabetes. The company s own injection systems and pen needles as well as infusion sets and commercial products purchased from third parties in particular devices for the self-monitoring of blood glucose levels as well as infusion pumps, accessories and many dayto-day items for diabetics are sold through the company s own distribution network and by independent distributors. The Ypsomed Group also includes Ypsotec, headquartered in Grenchen, Switzerland, a supplier of precision turned parts and subassemblies. Code of Conduct of the Ypsomed Group and correspond to the Corporate Governance Directive of October 29, 2008, issued by the SIX Swiss Exchange. The Board of Directors has issued an organizational policy that stipulates the duties, powers and responsibilities of the executive bodies of the Ypsomed Group. The main features of this policy are set out on page 86 under the section on regulations concerning authority. A copy of Ypsomed Holding AG s Articles of Association (in the German version) can be ordered in print form from the company or can be viewed in its current version on the company s website at (under Media & Investors/Publications/Corporate Governance). A copy of the Code of Conduct of the Ypsomed Group (in German, English and French versions) can be ordered in print form from the company or can be viewed in its current version on the company s website at (under Media & Investors/Publications/Corporate Governance). Compliance with the basic principles and values laid down in the Code of Conduct is reviewed on an ongoing basis during the company s day-to-day business. In addition, the Board of Directors receives information on a periodic basis regarding experiences with the Code of Conduct. The Ypsomed Group s rules and regulations on Corporate Governance are defined in the Articles of Association, in the Organizational Policy of Ypsomed Holding AG and in the Corporate Governance 75

95 Ypsomed Corporate Governance Report Group structure Ypsomed Holding AG is organized as a holding company pursuant to Swiss law and directly or indirectly owns or controls all companies that are part of the Ypsomed Group worldwide. None of Ypsomed Holding AG s subsidiaries are listed companies. History of Ypsomed s development Ypsomed was formed from what was previously Disetronic, which was founded in 1984 and which developed and produced infusion systems and also, starting in 1986, injection systems. On April 30, 2003, Roche Holding AG acquired the infusion business of Disetronic through a public tender offer. Willy Michel continued the injection business under the Ypsomed trade name. Listed holding company Ypsomed Holding AG, which has its headquarters in Burgdorf, is the holding company of the Ypsomed Group. It has a share capital of CHF , divided into registered shares with a par value of CHF each. Shares in Ypsomed Holding AG were traded on the Main Standard of the SIX Swiss Exchange from September 22, 2004, to September 28, Since September 29, 2011, shares in Ypsomed Holding AG have been traded on the Domestic Standard of the SIX Swiss Exchange. The shares have also been traded since June 27, 2007, on the BX Berne exchange. The move from the Main Standard to the Domestic Standard of the SIX Swiss Exchange was associated with the switch in accounting standards from IFRS (International Financial Reporting Standards) to Swiss GAAP FER, which, in accordance with SIX Swiss Exchange s accounting guidelines, results in a change of segment. Security Number /Ticker symbol: YPSN. as of 31 March 2013 as of 31 March 2012 Market capitalization in CHF in % of equity 320.1* 319.1* Share price in CHF Price-earnings ratio 423.1** 82.1** * Equity on 31 March 2012: TCHF Equity on 31 March 2013: TCHF ** Profit per share 31 March 2012: CHF 0.67 Profit per share 31 March 2013: CHF

96 Ypsomed Corporate Governance Report Operating organization The Ypsomed Group s operating organization is based on a parent company structure. It is divided into the following departments: Delegate of the Board of Directors and CEO, Operations (including Production, Logistics and Quality Management & Regulatory Affairs), Technology, Corporate Finance/IT, Marketing & Sales, Human Resources, and Legal & Intellectual Property. As a rule, two members of Ypsomed Group management sit on the Board of Directors of each subsidiary. In terms of operations, the Ypsomed Group is divided into two business segments: The Delivery Devices segment consists of business with the product group s pen systems, pen needles, infusion sets and other injectionmolded parts that are developed and manufactured by Ypsomed. The Diabetes Direct Business segment consists of the sales and direct trade business with various supplies for diabetes care, for example, devices for the self-monitoring of blood glucose levels as well as infusion pumps, accessories and other day-to-day items for diabetics. The Other segment brings together precision-turned parts and real estate not currently in operational use. Corporate structure at March 31, 2013 Ypsomed AG Burgdorf / Solothurn 100 % Ypsomed Distribution AG Burgdorf 100 % Ypsomed Holding AG Burgdorf Ypsotec AG Grenchen 100 % Ypsotec s.r.o Tábor, CZ 100 % Tecpharma Licensing AG Burgdorf 100 % Corporate Governance Ypsomed GmbH Liederbach, DE 100 % feelfree GmbH Liederbach, DE 100 % Ypsomed BV Vianen, NL 100 % Ypsomed AB Bromma, SE 100 % Ypsomed SAS Paris, FR 100 % Ypsomed Ltd. Selby, UK 100 % Ypsomed India Private Ltd. New Delhi, IN 100 % Ypsomed GmbH Vienna, AT 100 % DiaExpert GmbH Liederbach, DE 100 % 77

97 Ypsomed Corporate Governance Report Ypsomed Corporate Governance Report General statutory reserves Capital structure Capital Ypsomed Holding AG has a share capital of CHF , divided into fully paid-up registered shares, each with a par value of CHF All shares entitle the holder to receive dividends. The company has issued neither profit certificates nor participation certificates. There are no convertible bonds outstanding, and no options have been issued for participation rights in Ypsomed Holding AG or any Group companies. Conditional share capital Ypsomed Holding AG has conditional share capital totaling CHF The company may issue to selected employees and members of the Board of Directors up to a maximum of registered shares, to be paid up in full, with a par value of CHF each. Shareholders purchase and advance subscription rights are excluded. Pursuant to the Articles of Association, shares and option rights may be issued at a price below the stock market value. The acquisition of shares through the exercising of subscription or option rights is subject to the statutory recording limitation and the statutory voting right limitation (see below). The company has not issued any shares or option rights to date. Authorized share capital Until June 26, 2014, the Board of Directors is authorized at any time to increase the share capital by CHF by issuing a maximum of fully paid up registered shares with a nominal value of CHF each. Several increases in smaller amounts are permitted. The Board of Directors is authorized to restrict or withdraw shareholders subscription rights and assign them to third parties (1) for the acquisition or partial acquisition of companies, parts of companies or participating interests, (2) for the financing or refinancing of the acquisition of companies, parts of companies or participating interests, or (3) for the expansion of international distribution structures. Shares for which subscription rights have been granted but not exercised are to be allocated by the Board of Directors in the interests of the company. The Board of Directors shall determine the time and amount of each issue, the point in time at which an entitlement to a dividend accrues, the nature of contributions and, if relevant, the nature of contributions in kind or the takeover of tangible assets. In this regard, the Board of Directors may issue new shares by means of firm underwriting by a bank or third party followed by an offer made to existing shareholders. The subscription to and purchase of the new shares and any subsequent transfer of the shares is limited by the provisions of the Articles of Association. The Board of Directors made no use of its authorization during the reporting year. Changes in capital Capital has changed in recent years as follows: Changes in equity capital up to March 31, 2013, pursuant to the accounts of Ypsomed Holding AG produced in accordance with company law. Date Issue Number of shares Nominal value Share capital Capital reserves Retained earnings Reserves from equity Founding Net profit Balance Reverse merger with Finox Beteiligungen AG Capital increase settled with shareholder loan Split 1 : Capital increase IPO Capital increase IPO over-allotment Net profit Nominal value reduction CHF 0.90 per share Net profit Nominal value reduction CHF 1.25 per share Reserves for own shares Net profit Reserves for own shares Net profit Nominal value reduction CHF 0.60 per share Reserves for own shares Net profit Nominal value increase Capital increase Nominal value reduction CHF 0.60 per share Reserves for own shares Net profit Nominal value reduction CHF 0.25 per share Reserves for own shares Reassignment of capital reserves to reserves as capital investments Reassignment of capital reserves to reserves as capital investments Reclassification of general reserves Net profit Reassignment of capital reserves to reserves as capital investments Adjustment capital contribution reserves Reserves for own shares Net profit Reassignment of capital reserves to reserves as capital investments Net profit Balance Share premium of IPO Capital in % IPO costs Share premium gross Share premium net Capital increase % Capital increase % Total % General reserves Reserves for own shares Total Corporate Governance The costs for the IPO have been capitalized in the statutory accounts 78 and have been amortized over five years since September

98 Ypsomed Corporate Governance Report Shareholder structure Registered shareholders There were shareholders registered in the Share Register on March 31, 2013 (prior year: shareholders). Of these shareholders, 98% report Switzerland as their place of residence. The distribution of shareholdings is as follows: Number of shares Number of shareholders Number of shareholders as of 31 March 2013 as of 31 March to to to to more than Significant shareholders and significant shareholder groups The Michel family shareholder group, set up for the purposes of holding shares in family ownership, comprises Willy Michel, Chairman of the Board of Directors and CEO of Ypsomed Holding AG and the Ypsomed Group, who holds shares both directly and indirectly via Techpharma Management AG, which he controls, as well as his children Simon Michel, Serge Michel and Lavinia Camilla Nussio, who each hold shares directly. As of March 31, 2013, the Michel family shareholder group holds a combined total of registered shares (previous year: ) in Ypsomed Holding AG, equating to 76.35% (previous year: 76.29%) of all shares in the company. In the previous year (ended March 31, 2012), Patinex AG, Egglirain 24, CH-8832 Wilen, a company controlled by Martin and Rosmarie Ebner, disclosed a 3.02% holding (disclosure of August 13, 2011) and a 5.21% holding (disclosure of February 23, 2012) in the company. The company was not informed of any changes during the reporting year. There are no other known significant shareholders or significant shareholder groups. Accounting standards With effect from September 30, 2011, Ypsomed changed its accounting standard from IFRS to Swiss GAAP FER. Since that time, SWISS GAAP FER has been used as an accounting and reporting standard. The foremost principle of Swiss GAAP FER is to promote a true and fair view of the assets, liabilities, financial position and profit or loss, so informative and reliable accounting remains guaranteed under Swiss GAAP FER. Group accounting in accordance with Swiss GAAP FER comprises comprehensive consolidated accounts including profit and loss statement, balance sheet, cash flow statement, statement of changes in equity, as well as selected management statistics. Cross participations There are no cross participations. 80

99 Ypsomed Corporate Governance Report Limitation on the transferability of shares No share certificates are issued for Ypsomed Holding AG shares. Any shareholder may ask the company at any time to issue a confirmation regarding the registered shares entered in the Share Register in his name. Any person validly entered in the Share Register as an owner or beneficiary is considered to be a shareholder of the company. Any person acquiring registered shares or the beneficial entitlement to registered shares must apply in writing to be entered in the Share Register. Approval is given by the Board of Directors, which may delegate this power. The transfer is then entered in the Share Register. Applicants will be entered in the Share Register as shareholders with voting rights provided they expressly declare that they have acquired the registered shares in their own name and for their own account. If this declaration is not made, the Board of Directors may refuse the entry. The Board of Directors may draw up guidelines for the entry of nominees and may permit nominees to be entered in the Share Register with voting rights for shares up to a maximum of 5.0% of the nominal share capital. The Board of Directors may also allow nominees to be entered in the Share Register with voting rights for shares exceeding this limit if the nominees disclose the names, addresses, nationality, domicile and shareholdings of the natural persons and legal entities on whose account they hold 1.0% or more of the nominal share capital. The 5.0% limit also applies to nominees who are related to one another through capital ownership or voting rights by virtue of a common management or otherwise. If a shareholder has been entered in the Share Register on the basis of incorrect information then the Board of Directors may, after having given the parties involved the right to be heard, remove from the Share Register the entry as a shareholder with voting rights and replace it instead with an entry as a shareholder without voting rights. In the year under review, no applications for the entry of nominees were made. Restrictions on the transfer of registered shares may only be amended by a resolution passed at the General Meeting of Shareholders with a qualified majority of at least two-thirds of the votes represented and an absolute majority of the nominal share capital represented at such a meeting. Board of Directors Members of the Board of Directors The Board of Directors consists of a minimum of three and a maximum of five members elected for a term of office of three years with the possibility of re-election. The members of the Board of Directors were re-elected in globo on the occasion of the 2010 General Meeting of Shareholders. The Board of Directors is self-constituting. Willy Michel was a member of the executive management of Disetronic Holding AG until April 2003, non-executive Chairman of the Board of Directors of Ypsomed Holding AG between 2003 and August 2011, and since August 2011 has been Delegate of the Board of Directors and CEO of both Ypsomed Holding AG and the Ypsomed Group. The other directors are non-executive members of the Board of Directors. The main task of the Board of Directors is the overall management of the company and the supervision and control of executive management. As Delegate and CEO, Willy Michel represents both the Board of Directors of Ypsomed Holding and the Ypsomed Group externally. The other members of the Board of Directors are not actively employed in operative functions at either Ypsomed Holding AG or at any of its subsidiaries, nor have they held any such positions in the past three years. With the exception of Willy Michel, no business relationships exist between the individual members of the Board of Directors and Ypsomed Holding AG or any of its subsidiaries. The following business relationships between Willy Michel and affiliated persons and Ypsomed Holding AG and/or its subsidiaries existed in the year under review (information relating to the actual remuneration paid directly or indirectly in the 2012/2013 business year that is stipulated by Art. 663b bis of the Swiss Code of Obligations can be found in the Notes to the 2012/2013 financial statement, see page 67). Executive loan Willy Michel made a loan to the company that he assigned to his company Techpharma Management AG. In the year under review, an amount of CHF 4.5 million was paid off. As of March 31, 2013, a loan amount of CHF 20 million was still outstanding. The key terms of the loan agreement as of March 31, 2013 are: Since April 1, 2010, the loan has borne interest at a rate based on the CHF 12-month LIBOR as published by the Swiss National Bank plus 0.5% and it is adjusted in line with the prevailing rate as at the end of March Corporate Governance 81

100 Ypsomed Corporate Governance Report and the end of September every year. Ypsomed Holding AG may repay the loan in full or partially at any time. However, it is repayable by March 31, 2017, at the latest. Techpharma Management AG renounces the amortisation in the business year 2013/14. Starting April 1, 2014, Techpharma Management AG may each year demand repayment of a maximum of CHF 5.0 million at three months notice. There are no further executive loans. Rental contract Willy Michel (respectively the company Techpharma Management AG which he controls) has been renting out the building on Buchmattstrasse in Burgdorf (Ypsomed Nord) to Ypsomed since January 1, The parties signed a rental contract set at an indexed market rent, based on a rental assessment performed by an independent party. The rent was reduced on January 1, 2012, to CHF plus VAT (excluding additional costs). The rental contract can be terminated for the first time on December 31, 2015, conditional upon 24 months notice. The tenant has unlimited first right of refusal for purchasing the property for the entire rental period, but for a maximum of 25 years from the start of the rental. The rental contract dictates that small and normal maintenance work on the building be paid by the tenant up to a maximum amount of 2.0% of the annual rent per calendar year. Major maintenance work and repairs necessary for safeguarding the asset value of the building are at the lessor s expense. On termination of the contract, the tenant will be reimbursed for the alterations carried out to the leased property with the lessor s consent in application of Swiss GAAP FER depreciation rates at the residual book value. The rental contract was discussed and approved by the Board of Directors, in whose opinion this is regarded as a rental contract at normal market conditions. Other contractual relationships Willy Michel (respectively his company Techpharma Management AG) and Ypsomed have concluded a framework service contract that can be terminated by either side at any time. This contract allows for Techpharma Management AG to provide occasional services to the Ypsomed Group (e. g. hotel and catering services) as well as selected management support services (including temporary personnel leasing) and, for its part, for the Ypsomed Group to offer occasional services to Techpharma Management AG (e. g. management and IT support, including temporary personnel leasing). The services are invoiced at normal market conditions. The mutual supply of temporary personnel is invoiced at the personnel cost rate. This contract was discussed and approved by the Board of Directors, in whose opinion this is a cooperation agreement at normal market conditions. The framework service contract has been expanded inasmuch as Willy Michel has been performing the function of CEO since August The amount of remuneration hitherto for the management services provided personally to the company by Willy Michel was for this reason not adjusted. It remains at CHF plus VAT (previous year: CHF ). This amount represents the full remuneration for all consulting and other work carried out by Willy Michel, including his activity as CEO in the year under review. Willy Michel has expressly waived the right to any more extensive remuneration for his operating activities as CEO in the year under review. Contractual relationship with Finox AG A cooperation contract existed between Ypsomed Holding AG and two of its subsidiaries on the one hand, and Techpharma Management AG (which is controlled by Willy Michel) and its subsidiary Finox AG on the other hand. This contract was terminated on December 20, 2011, and replaced by a licensing agreement. Finox AG primarily develops pharmaceuticals, in particular fertility hormones as well as devices for their administration. The licensing agreement regulates the rights to the technology and the industrial property rights developed under the cooperation contract with regard to the administration devices. Ypsomed AG is granted a license for the use of two administering technologies outside of the specified areas of application. Finox AG may use the industrial property rights developed under the cooperation contract on an exclusive basis within specified areas of application. Under the licensing agreement, Finox AG can continue to use consultancy services provided by Ypsomed employees at hourly and daily rates that are in accordance with the prevailing market rates. Finally, the termination of the cooperation contract means that the former first right of refusal of Ypsomed AG to purchase the shares of Finox AG now no longer applies. The termination of the cooperation contract and the conclusion of the new licensing agreement were discussed and approved by the Board of Directors and, in the opinion of the Board, represent a cooperative relationship that is usual in the market. 82

101 Ypsomed Corporate Governance Report Members of the Board of Directors Dr. h. c. Willy Michel, Chairman of the Board of Directors and CEO of Ypsomed Holding AG and the Ypsomed Group, founded Disetronic together with his brother in They were together until his brother s departure from the business in 1995, and thereafter Willy Michel was solely responsible for the development, production, distribution and sale of Disetronic products (until 1999). Within the scope of the sale of Disetronic to Roche Holding AG in 2003, Willy Michel repurchased the injection business of Disetronic, which has since then traded under the name Ypsomed. He has held the post of Chairman of the Board of Directors of the Disetronic Group and now of the Ypsomed Group without interruption. Prior to the founding of Disetronic, Willy Michel, who holds a professional qualification as a pharmaceutical consultant with a federal diploma, obtained a broad range of experience with several industrial and pharmaceutical companies in the fields of development, sales and marketing, and he was the head of novo Nordisk Switzerland for six years (from 1978 until 1984). For three years (from 1998 until 2001) he was a member of the Burgdorf City Council, and in 2004 the city awarded him its Medal of Honor. Willy Michel is the majority shareholder and Chairman of the Board of Directors of the listed company Finox AG, which is active in the development, manufacturing and sale of pharmaceuticals. He is also Vice-Chairman (Chairman from 2001 to March 2008) of the Board of Directors of BV Holding AG, an equity investment company which is listed on the BX Berne exchange, and Chairman (since 2012, a member since 2007) of the Board of Directors of Adval Tech Holding AG, which is listed on the SIX Swiss Exchange. In addition, he is the owner of a number of companies, including well-known firms involved in the fields of art, watchmaking and gastronomy, and is a member of the Boards of Directors of various non-listed companies operating in different sectors from the Ypsomed Group and of no significance to its business activities. Willy Michel was declared the Master Entrepreneur of the Year for his overall business performance by Ernst & Young AG, and in 2006 he was awarded an honorary doctorate (Dr. h. c.) by the Economic and Social Science Faculty of the University of Bern. Prof. em. Dr. Norbert Thom, Member of the Board of Directors of Ypsomed Holding AG since After studying economics and social sciences at the University of Cologne (Dr. rer. pol. and habilitation in business management), Norbert Thom completed a full academic career spanning some 40 years spent at four universities (Cologne, Giessen, Fribourg, Bern) before his retirement in In Bern, Prof. Thom was founder and director of the Institute of Organization and Human Resource Management (1991 to 2012) as well as holding several other offices at the university including Vice-Rector for Finance and Planning. For his academic achievements, Prof. Thom has received awards in Switzerland and abroad, including three honorary doctorates and one honorary professorship. Prof. Thom has maintained close links with the business world for many years. Alongside consultancy work and membership of advisory boards, he has also sat on several boards of non-listed companies operating in different sectors from the Ypsomed Group and of no significance to its business activities. Currently, in his capacity as professor emeritus, he retains ties to the University of Bern, most notably as a lecturer for its Executive Master of Health Administration program. Since 2012, he has also been a member of the Supervisory Board of the REHAU Group (Muri near Bern), a global plastics concern. Corporate Governance 83

102 Ypsomed Corporate Governance Report Gerhart Isler, Member of the Board of Directors of Ypsomed Holding AG since After completing his studies in economics at the University of Zurich, Gerhart Isler joined the family newspaper publishing company Finanz und Wirtschaft AG as an editor in In 1980 he managed the company s editorial department in New York, was head of foreign correspondents from 1981 until 1986, and then held the position of manager of the publishing house until He then became the owner of Finanz und Wirtschaft, which enjoyed strong growth up to 2000 and became the country s most important financial newspaper. Mr. Isler subsequently sold the publishing firm but continued as its editor until the end of From 2005 until the end of 2008, Mr. Isler was a member of the Board of Directors of the listed company PubliGroupe and from 2008 to spring 2012 he was a member of the Board of Directors of the listed investment company New Value. In 2005, he was elected to the Board of Directors of Grand Casino Baden. Mr. Isler has been a member of the Board of Trustees of the move>med Foundation, which is involved in the field of sports, since Furthermore, Mr. Isler has been head of the Bergdietikon municipal council since early Anton Kräuliger, Vice-Chairman of the Board of Directors of Ypsomed Holding AG (member of the Board since 2007). After completing his studies at ETH Zurich with a degree in Mechanical Engineering, Anton Kräuliger joined the family business in 1971 and in 1978 took over the majority shareholding in Lyss AG (today Metalyss AG), a metal foundry and fittings factory. He developed this company into the leading fittings group on the Swiss market, the Similor Group. Within the scope of the sale of the fittings division to Madison Private Equity Holding AG in 2002 and 2005, Mr. Kräuliger repurchased the Industrial Division, which today is combined into Metalyss AG once more. Between 1993 and 2004, Mr. Kräuliger was a member of the Board of Directors of the listed Berner Kantonalbank BEKB BCBE and continues to be an active member of several Boards of Directors including serving as Chairman of the Board of Directors of Metalyss AG (since 1978), Chairman of the Board of Directors of Sécheron SA (since 2005) as well as a member of the Board of Directors of the parent company Sécheron-Hasler Holding AG (since 2005). Anton Kräuliger is also the owner of Moospinte AG, a restaurant in Mu nchenbuchsee. As a member of the City Council for the town of Kappelen he is director of the Finance Department. Name Nationality Year of birth Position Member since* Elected until the GV Dr. h. c. Willy Michel Swiss 1947 Chairman of the Board of Directors as CEO Gerhart Isler Swiss 1949 Member of the Board of Directors Prof. em. Dr. Norbert Thom German 1946 Member of the Board of Directors Swiss Anton Kräuliger Swiss 1946 Vice-Chairman of the Board of Directors * Including membership of the Board of Directors of Disetronic 84

103 Dr. h. c. Willy Michel Prof. em. Dr. Norbert Thom Corporate Governance Anton Kräuliger Gerhart Isler 85

104 Ypsomed Corporate Governance Report Interrelated companies Willy Michel is also Vice-Chairman of the Board of Directors of BV Holding AG, which is listed on the BX Berne exchange. On March 31, 2013, BV Holding AG held a total of shares in Ypsomed Holding AG (previous year: shares), representing a shareholding of 0.18% (previous year: 0.18%). Willy Michel is also Chairman of the Board of Directors of Adval Tech Holding AG, a company listed on the SIX Swiss Exchange and with headquarters in Niederwangen. In June 2007, Ypsomed AG and Adval Tech Holding AG signed an agreement on strategic cooperation in tool construction with a fixed contract term of five years. Under this agreement, both groups of companies have been able to bring their respective strengths and core competencies to bear in projects for the efficient manufacturing of high-quality products. Thus Ypsomed occasionally has had tools manufactured under this agreement by Adval Tech or its group companies at fair market prices based on standard industry conditions and existing competitive offers. In addition, Ypsomed AG signed a subcontractor agreement with an Adval Tech group company in May 2012 under which Adval Tech manufactures infusion sets for insulin pumps as a subcontractor for Ypsomed. The contract was discussed and approved by the Board of Directors and, in its opinion, is comparable to a standard subcontractor agreement for the market. A further project for the contract manufacture of injection pens is in the preparatory phase. How the Board of Directors operates The Board of Directors holds regular meetings four times per year at which it accepts management s written report and the verbal comments of the Delegate and CEO, deliberates and also decides on management proposals. The auditors participate in the May meeting of the Board of Directors at which they give information on the comprehensive report and on other questions. The Board of Directors meets on one additional occasion per year for two to three days within the context of a strategy meeting with management. Occasionally the Board of Directors makes additional decisions by correspondence. The agendas for the meetings are set by the chairman; any member may ask for points to be included on the agenda. The members receive the agenda and the necessary basis for decision-making generally seven to ten days before each meeting. Any member of the Board of Directors may request information about any aspect of the Group s affairs. Votes and resolutions within the Board of Directors are taken by majority decision; if the vote is tied, the Chairman, or in his absence the Vice-Chairman, has the deciding vote. Votes may not be taken by proxy. Meetings of the Board of Directors are regularly attended by the CFO and, depending on the business to be discussed, by other members of management. Simon Michel, the son of Willy Michel and a member of management, also takes part in Board of Directors meetings with an advisory role. Given the size and composition of the Board of Directors, it may advise and decide on all matters in plenary. However, it may delegate individual powers to a committee of the Board of Directors. There is also a monitoring committee consisting of three members of the Board of Directors, but not the Chairman of the Board of Directors. The members of the monitoring committee are Anton Kräuliger, Gerhart Isler and Prof. em. Norbert Thom. In the year under review, the Board of Directors met a total of five times and passed several resolutions by correspondence. During the Board of Directors meeting in May 2012, the lead auditor participated. The Board of Directors additionally met in March 2013 for two and a half days as part of the strategy meeting with executive management. All members of the Board of Directors participated in all Board of Directors meetings, in the General Meeting of Shareholders of June 2012, and in the strategy meeting of March Regulations concerning authority The Board of Directors by law has certain non-transferable and irrevocable duties. It has the highest decision-making power in the company, under restriction of those matters on which shareholders must decide in accordance with the law. In particular, it defines company policy, the mission statement consisting of a mission and a vision and the strategic direction of the Ypsomed Group, sets its targets and priorities, and allocates the resources for achieving the targets set. The Board of Directors defines the organization of the Ypsomed Group, supervises business activities, controls the finance and accounting divisions and is responsible for appointments and dismissals as well as the supervision of the individuals entrusted with management duties. It is responsible for the Annual Report, issues the Code of Conduct, approves the budget and the mid-term planning for executive management and also monitors the business activities of the Group companies. It periodically assesses strategic, operational and financial risks. The Board of Directors approves individual business affairs. This includes, in particular, decisions on the purchase or sale of companies and properties as well as the conclusion of contracts regarding strategic cooperation and contracts with other financial significance. The Board of Direct- 86

105 Ypsomed Corporate Governance Report ors approves securities obligations and employment contracts with members of management. At least once a year, the members of the monitoring committee speak individually with the persons in charge of the internal control system, risk management and compliance on the topics of monitoring the internal control system, risk management, compliance and internal audit planning. They report on their findings to the entire Board of Directors. The responsibilities of the Board of Directors and of the other decision-makers within the Ypsomed Group are fixed in the assignment of authority. Otherwise, the Board of Directors has delegated responsibility for running the company to its Delegate and CEO. Instruments for information and control with regard to management The Ypsomed Group s information and control instruments (Management Information System, MIS ), which are at the disposal of the Board of Directors, consist of written management reporting, which is produced quarterly (management review, quarterly reports), and financial reporting. The Chairman of the Board of Directors and CEO has access at all times to the MIS. As Chairman of the Board and CEO of Ypsomed, Willy Michel chairs the management meetings that regularly take place every two weeks and also participates in them. The CFO and Simon Michel (member of management) regularly participate in the meetings of the Board of Directors. Furthermore, the entire Board of Directors meets for two to three days within the context of a strategy meeting with management and other employees during which there is also a focus on risk management. The officer responsible for risk management takes part in all meetings of management, of the whole Board of Directors and in the strategy meeting. Furthermore, the Board of Directors uses strategic planning documents as management instruments for steering the company. Responsibility for risk management and monitoring rests with management, which reports on these matters periodically to the Board of Directors, but at least once a year. In addition to these documents, further selected financial figures are at management s disposal on a monthly basis. Risk assessment is based on a risk inventory that encompasses the relevant risk categories such as strategic risks, management risks, general risks in operating business, legal risks, systemic risks, financial risks (including market, credit and liquidity risks) and event risks (including political, regulatory, fiscal and external risks). These risks are assessed with regard to probability of occurrence and impact. The Internal Auditing function, for which the Board of Directors is directly responsible, is commissioned with the constant expansion of the documented, internal control system. The auditing plans are based on a risk-oriented procedure that relates to business processes and are geared towards the following goals and tasks: reviewing the fulfillment of business goals and objectives; evaluation of the effectiveness of risk management, control and corporate management processes; optimization of business processes; improvement of controls and processes with regard to the information systems; verification of controls and processes for accounting systems and financial reporting; confirmation and guarantee of authorized business transactions; safeguarding of assets; support with regard to complying with legal and regulatory requirements; and reviewing significant or particular business cases and transactions. The Board of Directors can determine additional areas to be reviewed. The officer responsible for internal auditing provides the auditors four times per year with appropriate documentation on his internal auditing activities and coordinates these with the auditing to be carried out by the auditors in the framework of the intermediate and yearend audits. Corporate Governance 87

106 Ypsomed Corporate Governance Report Executive Management The Delegate and CEO as well as the executive management team are responsible for the operational management of the Ypsomed Group within the scope of the guidelines laid down by the Board of Directors. Name Nationality Year of birth Position Acting for Ypsomed (or pre-2003 for Disetronic) Dr. h. c. Willy Michel Swiss 1947 as Chairman of the Board of Directors 1984 as CEO 2011 Dr. Benjamin Reinmann Swiss 1969 Senior Vice-President Operations 2011 Hans Ulrich Lehmann Swiss 1966 Senior Vice-President Technology 2011 Simon Michel Swiss 1977 Senior Vice-President Marketing & Sales 2006 Niklaus Ramseier Swiss 1963 Chief Financial Officer (CFO) 2002 Yvonne Müller Swiss 1969 Senior Vice-President Human Resources 2003 Dr. Beat Maurer Swiss 1958 Senior Vice-President Legal & Intellectual Property, Secretary of the Board Dr. h. c. Willy Michel Chief Executive Officer, CEO and Chairman of the Board of Directors

107 Simon Michel Senior Vice-President Marketing & Sales Dr. Benjamin Reinmann Senior Vice-President Operations Hans Ulrich Lehmann Senior Vice-President Technology Corporate Governance Niklaus Ramseier Chief Financial Officer (CFO) Yvonne Mu ller Senior Vice-President Human Resources Dr. Beat Maurer Senior Vice-President Legal & Intellectual Property 89